The manager of ESR-LOGOS REIT (ELOG), announced on Sept 1, that AMS-OSRAM Asia Pacific, one of the REIT&rsquo s top ten tenants, has renewed its tenancy at 7000 Ang Mo Kio Avenue 5.

 

AMS-OSRAM as the largest anchor tenant at the property, occupies about 46,220 sq m or 60.7% of the property by net lettable area (NLA). The property remains the largest site office of AMS-OSRAM in Singapore and is also the headquarters for its manufacturing and business operations.

 

AMS-OSRAM has renewed its lease for the production area and the office units for a five-year and two-year term, respectively. This renewal achieved a positive rental reversion of 12.9%.

 

With that, AMS-OSRAM will remain as one of the top ten tenants by effective gross rent in ELOG&rsquo s portfolio.

 

&ldquo With the ongoing development of a new modernised building at the property, we envisage 7000 Ang Mo Kio becoming an iconic high-specs property of choice for industrialists in the advanced manufacturing and data centre sectors,&rdquo says Adrian Chui, chief executive officer and executive director of ELOG.

DESPITE concerns over surging inflation and interest rates, acquisitions by Singapore-listed Real estate investment trusts (S-Reits) &ndash led by those in the industrial space &ndash are bolstering sentiment that the worst could soon be over for this segment of the local market.

 

The deals announced may also be an indication of where investors should focus their attention as the S-Reit market falters.

 

ESR-Logos Reit : J91U 0% on Aug 29 announced the proposed acquisition of a 5-storey modern logistics asset in Japan for a purchase consideration of 17.8 billion yen (S$183.5 million), inclusive of rental support.

 

The transaction &ndash the first direct asset acquisition from its sponsor following the merger between ESR-Reit and Ara Logos Logistics Trust &ndash is expected to be 2.9 per cent accretive to distribution per unit (DPU) on a pro forma basis.

 

This was the second acquisition announced by an industrial S-Reit in August.

 

Ascendas Real Estate Investment Trust : A17U -2.08% (A-Reit) on Aug 4 said it is acquiring the Philips Apac Center in Singapore for S$104.8 million.

 

On a pro forma basis, the proposed acquisition is expected to be 0.3 per cent accretive to DPU.

 

Interestingly, A-Reit&rsquo s announcement of the proposed acquisition came just 2 days after it released its results for the first half ended June.

 

At a briefing accompanying the results announcement on Aug 2, chief executive officer of the Reit manager William Tay noted that A-Reit was &ldquo unlikely&rdquo to hit S$1 billion worth of acquisitions this year, and that any inorganic growth would likely be in &ldquo smaller chunks&rdquo .

 

Indeed, the slowdown in acquisitions by S-Reits this year has been glaring.

 

Fewer than 20 deals have been announced, with total purchase consideration of around S$5 billion.

 

With two-thirds of the year over, it is unlikely that S-Reit acquisitions will come close to the 50-odd asset acquisitions announced in 2021, which exceeded S$12.7 billion in total purchase consideration.

 

&ldquo With the current volatility, market acquisitions are likely to be more piecemeal in nature rather than (by) portfolio, as the latter involves extended time frame and premium valuations, which are unfavourable in current market conditions,&rdquo said RHB analyst Vijay Natarajan in a recent report.

 

Notably, however, over half of the number of announced acquisitions in the year to date have been in the industrial and logistics space.

 

The recent acquisition announcements also come on the back of a steady set of results for the industrial S-Reits.

 

For example, A-Reit, Singapore&rsquo s largest listed business space and industrial Reit, posted a 2.8 per cent rise in DPU for H1 to 7.873 cents, as gross revenue rose 13.7 per cent to S$666.5 million. Net property income was up 7 per cent to S$476.8 million.

 

One of the key highlights in A-Reit&rsquo s latest results was a positive 13.2 per cent average rental reversion for the second quarter ended June, bringing rental reversion for H1 to 9.4 per cent.

 

The Reit manager raised its guidance for rental reversion for the full year to be in the &ldquo positive mid-single-digit range&rdquo , up from a positive low-single-digit range previously.

 

Overall portfolio occupancy rate also improved 1.4 percentage points quarter on quarter to 94 per cent as at end-June.

 

Even if the pace of acquisitions remains markedly slower this year, market watchers see room for the Reit to continue to thrive.

 

&ldquo Having acquired more than S$2.1 billion in assets in FY21, A-Reit is on track to deliver DPU growth of close to 4.6 per cent in FY22,&rdquo said DBS analysts Dale Lai and Derek Tan in a recent report.

 

The analysts added that, beyond acquisitions, A-Reit could also rejuvenate its sizeable portfolio to add value to older properties and tap unutilised plot ratios, which will create a further upside to earnings.

 

&ldquo We believe that investors have not priced the net asset value (NAV) uplift from the redevelopment of its other Science Park assets into properties with higher specifications and higher plot ratios,&rdquo they said. &ldquo The redevelopment of 1 Science Park Drive together with its sponsor paves the way for close to S$5.6 billion in gross development value to be unlocked from its assets at Science Parks 1 and 2.&rdquo