Sabana REIT

Sabana REIT's 3Q15 DPU slid 2.2% y/y to 1.77¢, weighed by a larger unit base, while distributable income rose 2.2% to $13m.

Gross revenue and NPI edged up slightly to $25.5m (+1.5%) and $18.3m (+1.4%), respectively, mainly lifted by contribution from 10 Changi South Street 2 which was acquired in Dec '14, but partially offset by the exhaustion of vendor's rental support for 9 Tai Seng Drive in 2Q15, and higher property expenses from 2 Toh Tuck Link which was converted into a multi-tenanted property in 4Q14.

Portfolio occupancy improved 0.8ppt q/q to 91.7%, while weighted average lease expiry was shortened to 1.7 years (-0.3 years).

Aggregate leverage was relatively unchanged at 38.0% and proportion of fixed borrowings stood at 81.9%. The industrial REIT has an average cost of debt at 4.2% and average debt tenor of 2.3 years.

Going forward, management expects market conditions to remain challenging, and as such aims to manage lease expiries proactively and be more aggressive in its marketing efforts.

A case in point in early 4Q15, management converted 23 Serangoon North Avenue 5 into a multi tenanted property from its previous master lease arrangement. The property was one of the 11 master leases which is expiring in 2015, while the remaining 10 expiring leases are also in final stage of negotiations.

Sabana REIT currently trades at 8.9% annualized 3Q15 yield and 0.7x P/B