S-Reits commence Q3 earnings season as interest rates remain in focus

The reporting season for Singapore real estate investment trusts (S-Reits) commenced on October 15, with a total of 26 S-Reits confirming the release of their latest financial results or business updates between October 21 and November 6. Three S-Reits will report full-year financial results, three will provide first-half financial results, while 20 will release quarterly business updates.

Aims Apac Reit (AA Reit) led the season with a 4% increase in distribution per unit (DPU) for the first half of fiscal year 2027, driven by acquisitions, asset enhancement initiatives, and lower property expenses. Net property income rose 11.1% and rental reversions were positive at 5.7%, while portfolio occupancy remained stable at 93.7%.

Borrowing costs for AA Reit fell to S$15.4 million from S$16 million a year earlier, with blended debt funding cost at 3.9% from 4.2%. USmart initiated coverage of AA Reit with an "outperform" rating, citing resilience in industrial income and DPU growth, despite a higher post-redemption debt burden.

Analysts remain broadly optimistic about the S-Reit sector despite higher interest rates, as five decades of milestones have shaped Singapore's success story. Phillip Securities Research maintains an overweight recommendation on S-Reits, citing stable operating fundamentals and potential re-rating for those with strong balance sheets. Retail-focused S-Reits like Frasers Centrepoint Trust and Lendlease Global Commercial Reit are favored due to resilient tenant sales and limited new supply.

S-Reits with significant retail exposure, such as Frasers Centrepoint Trust and Lendlease Global Commercial Reit, are scheduled to release their results on October 22 and October 30, respectively. DBS Group Research noted that the muted S-Reit price reaction after the recent rate hike suggests much of the near-term rate risk has already been priced in, and that S-Reit balance sheets are better protected today.