- Singapore REITs sector continues to be buffeted by repricing of debt and related hedges as well as adverse FX moves. Occupancy exhibited mixed trends. On the brighter side, reversions stayed positive and margins are showing signs of bottoming out as utility costs plateau.
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- Rising yields elevate the valuation threshold and we maintain our NEUTRAL sector stance.
Borrowing costs and FX key drags
- DPUs for the reporting period across REITs under coverage are down 2-10% h-o-h/ y-o-y for the industrial and commercial sub-sectors. DPUs for hospitality REITs grew y-o-y, benefitting from the low base but sequential weakness emerged as seasonality overshadowed reopening tailwinds.
- NAVs fell 0.3% to 2.3% on average from prior period figures across sub-sectors, led by revaluation losses, below-book placements and offerings, and forex impacts.
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- Reversions remain robust, ranging from high single-digit to mid-teens % points for the industrial and commercial sector. RevPAR/RevPAU grew 70% y-o-y for the hospitality sector.
- Funding costs rose 45bps sequentially/100bps y-o-y as the debt stack reprices. REIT managers are trying to cushion the impact by raising JPY debt and lowering hedge ratios, especially for the commercial and hospitality sectors.
Cloudy outlook; slow pace of capital recycling
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