Daiwa House Logistics Trust (DHLT) has reported a gross rental income (GRI) of 4.1 billion yen ($37.2 million) for the 9MFY2023 ended Sept 30, 4.9% higher y-o-y.
Net property income (NPI) for the same period stood at 3.5 billion yen ($31.7 million), 3.9% higher y-o-y.
The higher GRI and NPI were due to contributions from properties that were acquired in December 2022.
In Singapore dollar (SGD) terms, however, NPI fell by 6.4% y-o-y due mainly to the weaker yen against the SGD.
Distributable income for the 9MFY2023 increased by 2.2% y-o-y to $27.0 million mainly due to the contributions from the properties acquired in December 2022 and the realised foreign exchange (forex) gain in relation to the REIT’s hedges that were put in place.
DHLT will be making its distributions on a semi-annual basis. The next distribution will be made for the 2HFY2023 ending Dec 31.
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As at Sept 30, DHLT’s portfolio occupancy stood at 100.0%, thanks to a lease that was renewed in October 2023. The REIT has had a track record of 100% lease renewals since its listing in November 2021.
There are two remaining leases expiring in FY2023. According to the REIT manager, the tenants have indicated that they intend to renew and that negotiations are underway.
Portfolio weighted average lease expiry (WALE) stood at 6.3 years by GRI.
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Aggregate leverage stood at 36.2% with an interest coverage ratio of 11.8x.
Looking ahead, the REIT manager is expecting to see a dampening in overall rent growth in the near term due to a record level of new supply expected for the Japanese logistics market in 2023. During the year, over 7 million sqm of floor area is slated to be completed with 4.4 million sqm of these located in Greater Tokyo.
“DHLT’s portfolio comprises facilities that meet modern requirements with an average portfolio age of only around six years, while its properties in Greater Tokyo are mainly built-to-suit properties with an average WALE of approximately nine years by GRI,” says the REIT manager.
That said, the sector’s overall underlying fundamentals are expected to remain healthy amid the increase with sectors such as e-commerce expected to continue driving demand.
According to the REIT manager, the e-commerce sector in Japan has recorded strong growth in recent years. Despite the expansion of the market, business-to-consumer e-commerce penetration rates in the country still remains relatively low at 9.1% compared to more mature markets, indicating potential for further growth in this sector.
“We are pleased that the underlying performance of the portfolio has continued to improve and that the properties that were acquired in December 2022 have contributed positively. With the renewal of a lease in October 2023, DHLT also continued its strong track record of 100% lease renewal rate since its listing almost two years ago. Through this, DHLT was able to maintain income stability and also retained high-quality tenants. We will continue to manage the portfolio proactively,” says Jun Yamamura, CEO of the manager.
“Looking forward, we anticipate the operating environment to be challenging in the short term due to the substantial new supply in the Japan logistics market. However, demand is expected to remain healthy, supported by third-party logistics (3PL) and e-commerce sectors. Our portfolio is supported by a strong tenant base with more than 80% of the tenants, by GRI, involved in such sectors,” he adds.
“With Bank of Japan largely maintaining their accommodative monetary policy, the yen may remain weak against SGD in the near future. We will continue with our hedging policies which are in place to mitigate the adverse impact,” he continues.
As at 11.51am, units in DHLT are trading 0.5 cents higher or 0.96% up at 52.5 cents.
