ESR-REIT, formerly known as Cambridge Industrial Trust, was listed on the SGX on 25 July 2006. It invests in a portfolio of industrial properties located in Singapore. The year 2017 has been pivotal for ESR-REIT as the board has taken proactive measures to expand regionally. Here, I’ll bring a detailed account of its past achievements and pen down its recent developments that are material to its future. Therefore, these are the 10 things you need to know about ESR-REIT before you invest.
#1: Stock Symbol
Ticker Symbol: SGX: J91U
Market Capitalization: S$ 753.5 million (10 March 2018)
Share Price: S$ 0.575 (11 March 2018)
#2: 10-Year Portfolio Statistics
I’ve compiled the operating statistics of ESR-REIT for a period of 10 years. I discovered, from 2008 to 2017, ESR-REIT has:
- Maintained its number of properties at 40 – 50.
- Increased its portfolio valuation from S$ 0.8 billion to S$ 1.7 billion.
- Shifted its portfolio from single-tenanted buildings to a portfolio that consists of more multi-tenanted buildings. Hence, despite keeping its number of properties at 40 – 50, ESR-REIT has grown its tenant base from 50 to 207 and reduced its reliance of rental income contributed by top 10 tenants from 62.7% to 38.7%.
- As at 31 December 2017, ESR-REIT has 48 properties valued at S$ 1.7 billion.
Source: Annual Reports of ESR-REIT
#3: The Financials
I’ve also compiled the financial results of ESR-REIT over the last 10 years. It has reported:
Revenue has grown from S$ 72.3 million in 2008 to S$ 112.2 million in 2015 before dropping to S$ 109.7 million in 2017.
- Net Property Income (NPI)
NPI has increased from S$ 62.8 million in 2008 to S$ 86.2 million in 2015 before dropping to S$ 78.4 million in 2017.
- Distributable Income (DI)
DI has grown from S$ 47.9 million in 2008 to S$ 63.0 million in 2014 before dropping to S$ 50.4 million in 2017.
The decline in revenue, NPI, and DI from 2015 to 2017 is due to divestments made on several non-core properties and higher operating expenses incurred as ESR-REIT converts a portion of its assets from single-tenancy to one that is of multi-tenancy during the period.
Source: Annual Reports of ESR-REIT
#4: Lease Expiry
As at 31 December 2017, ESR-REIT has recorded a 93.0% in occupancy rate for its portfolio, deriving income from 207 tenants. Moving forward, 60% of ESR-REIT’s leases would begin to expire from the financial year 2020 onwards.
Source: Financial Results Presentation Q4 2017 of ESR-REIT
#5: Change of Major Shareholder
On 18 January 2017, e-Shang Redwood has emerged as a new major sponsor and shareholder of ESR-REIT as it has acquired 80% interests in Cambridge Industrial Trust Management (CITM) and also 100% interests in Cambridge Industrial Property Management Pte Ltd (CIPM) via its subsidiary, e-Shang Infinity Cayman.
e-Shang Redwood (ESR) is Asia’s leading logistics real estate developer and investor with presences in China, India, Japan, Korea and Singapore and has assets under management (AUM) in excess of US$ 10 billion as 31 December 2017. As at 28 February 2018, ESR owns 12.4% shareholdings of ESR-REIT.
#6: Portfolio Restructuring
ESR-REIT has restructured its portfolio by divesting its non-core properties, channeling its capital to acquire new investment properties. Details include:
- Divestments of 3 Properties
Since 2017, ESR-REIT has divested 3 properties for S$ 57.3 million. They include 55 Ubi Avenue 3, 23 Woodlands Terrace, and 87 Defu Lane 10 respectively.
- Acquisition of 8 Tuas South Lane
On 13 December 2017, ESR-REIT has completed its acquisition of 8 Tuas South Lane for S$ 106.1 million. It has 5 detached factories, one 8-storey warehouse, and 4 blocks of dormitory buildings. Currently, it is leased to mainly Hyflux Ltd for 15 years with built-in escalations in rental. This property is located close to the Tuas Megaport which would be developed in the future.
- Acquisition of 7000 Ang Mo Kio Avenue 5
On 14 December 2017, ESR-REIT has completed its acquisition of 80% stake in 7000 Ang Mo Kio Avenue 5 for S$ 240.0 million. The property consists of 6-storey high-specifications production block and 5-storey ancillary office block. Its anchor tenants include SP Services Ltd, StarHub Ltd, and Heptagon Micro Optics Pte Ltd. It has a weighted average lease expiry (WALE) of 5.5 years.
#7: Proposed Merger with Viva Industrial Trust (VIT)
On 28 January 2018, ESR-REIT has issued a proposal to merge with VIT to establish:
- The Fourth Largest Industrial REIT listed on the SGX valued at S$ 3 billion.
- A diversified Pan-Asia Industrial REIT with a visible growth pipeline of regional assets sponsored by ESR, a logistics real estate developer, operator, and fund manager with presence in China, India, Australia, Singapore, Japan, and Korea.
Presently, the managers of both ESR-REIT and VIT are in discussions on the merger. Both parties would make the necessary announcements on it should there be material developments on the merger in the near future.
As I write, ESR-REIT is trading at S$ 0.575 a unit.
As at 31 December 2017, ESR-REIT has reported having S$ 0.593 in net asset value a unit. Thus, its current P/NAV works out to be 0.97.
ESR-REIT adopts a distribution policy to declare and pays out at least 90% of its distributable income on a quarterly basis. The trust has declared and paid 3.853 cents in DPU for 2017. If ESR-REIT is able to maintain its DPU at 3.853 cents, its expected gross dividend yield is 6.7%.
#9: Debt Profile
As at 31 December 2017, ESR-REIT has S$ 672.0 million in borrowings. Its gearing ratio is 39.6%. Its weighted average debt maturity stands at 2.4 years, Its cost of borrowing averages at 3.55%.
#10: Investor Relations
For further enquiries or to request for additional investment information on ESR-REIT’s Investors Relation matters, you may contact:
Ms. Cheryl Lim
Marketing Communications Manager
Phone: +65 6827 9332