Two master leases at Singaporean buildings are renewed by AA Reit

SINGAPORE – Aims Apac Reit (AA Reit) has extended the master lease term with Cargill’s chocolate maker Aalst Chocolate near Normanton Park for an additional ten years, as well as renewed the master lease with Japanese logistics business Kintetsu World Express (KWE) for a further five years.

According to Reit’s manager on January 8, as of the end of September 2023, the two floor plans accounted for roughly 6.6% of the gross rent throughout the entire portfolio.

By virtue of the two renewals, AA Reit’s portfolio weighted average lease expiry date will be extended from 4.2 years to 4.6 years by gross rental income.

The management pointed out that both leases were subject to price escalations and were signed at a positive rental reversion over their expiration rental rate.

The lease on the facility has been extended to December 31, 2028, by KWE, one of the top 10 tenants in the Reit. The property, which is located in the Jurong Innovation District and has a gross floor size of 68,190 square meters, will undergo exterior building enhancement work by AA Reit.

The date of the lease extension with Aalst Chocolate is April 18, 2035. This property is a two-story industrial building with 5,858 square meters of leasable area, situated within Jurong Industrial Estate. Since April 19, 2007, the chocolate producer and its parent business, Cargill, have leased space from Reit, according to the management.

“AA Reit will undertake electrical upgrading works in order to support Aalst Chocolate’s business requirements,” the manager continued.

The Reit manager’s CEO, Mr. Russell Ng, cited “the sustained demand” from the sector as evidence of the Reit’s solid tenant connections.

On January 8, the counter ended the day at $1.32, down one penny.

Suggested Article: In 2024, is it better to rent or buy a private property?

Continue ReadingTwo master leases at Singaporean buildings are renewed by AA Reit

In 2024, is it better to rent or buy a private property?

It would have been recommended to many of us to climb the property ladder like Grand Dunman as quickly as feasible in order to extend our loan terms and benefit from the long-term trend. Therefore, in Singapore, where homeownership is among the greatest in the world, the age-old dilemma of whether to buy or rent a private property may appear to be answered—or is it?

Property advocates would be the first to cite the recent increase in real estate values as support for their position. In actuality, private property values rose 6.7% in 2023, following a 19% growth in the preceding two years. In addition, new condo developments are being introduced in the Outside Core, with most people visiting the Grand Dunman Floor Plan.

Pandemic-Induced Demand Driven An Increase In Property Prices

Singapore’s private property prices were mostly stable between 4Q2018 and 3Q2020. But when the COVID-19 outbreak began, demand began to soar, as evidenced by the sharp rise in the URA Property Price Index (PPI) below. Between 3Q2020 and 3Q2023, the total number of private properties in the three regions increased by 10% (Core Central Region), 38.5% (Rest of Central Region), and 31.6% (Outside Central Region).

A number of factors contributed to this price increase, including a decrease in the number of finished private developments in 2020, an increase in owner-occupier demand for resale private properties amid construction delays brought on by the pandemic, an increase in demand from foreigners, and higher labor and raw material costs as a result of the conflict between Russia and Ukraine.

Since December 2021, the government has implemented three more cooling measures, the most recent of which was implemented in April 2023, in an effort to rein in the high demand and sharp increase in home prices. In the most recent cycle, foreign buyers of residential properties were required to pay 60% of the Additional Buyer’s Stamp Duty (ABSD), whereas Singaporeans and Permanent Residents paying for their second property paid 20% and 30% of the ABSD, respectively.

The Rental Market Could Be Adjusting In The Upcoming Quarters
The URA Rental Index of Private Residential Properties indicates that during the same time period, rent for private properties also experienced sharp increases. From 3Q2020 to 3Q2023, rent increased overall in the CCR, RCR, and OCR regions by 48.5%, 59%, and 63.4%, respectively.

Numerous reasons that contributed to the surge in demand for residential property rentals from both domestic and international tenants have subsided.

Since the borders between Singapore and Malaysia were reopened, fewer non-resident Malaysian workers have been requesting services, while more individuals are starting to commute back and forth. Furthermore, as more individuals return to working in offices, locals who desire their own place to accommodate the WFH culture may find themselves reevaluating their needs.

Which Is Better: Purchasing or Renting?

The possibility of “paper hands” among property owners has decreased even though property prices are at an all-time high thanks to borrowing regulations like the ABSD and Total Debt Servicing Ratio (TDSR). The majority of homebuyers today would be able to finance their residences and would be less inclined to let them go at large discounts from their purchase price, barring a recession and widespread layoffs. Therefore, we might not see sharp price decreases even though property values might see a slower price rise or possibly a slight correction.

However, considering the increased supply of completed apartments in 2023 and the ensuing years, rents may moderate in the upcoming quarters. This might make more landlords more competitive by reducing their rental demands in order to attract a smaller pool of potential tenants. It may be better in certain cases to rent these homes rather than purchase them.

We look at the median prices and rentals for properties in each district that are an average size of 800–900 sqft, or a typical 2-bedroom condo unit, in order to determine which areas would be more affordable to rent than to buy.

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Three S-Reits that ignored the trend of raising DPUs

Most Singapore Reits that paid dividends for the fiscal year that finished on September 30, 2023, said that the distribution per unit (DPU) was smaller than the same time last year. Investment advice site Beansprout of Treasure at Tampines says that the smaller Treasure at Tampines floor plan is one reason why the share price of S-Reits has been going down.

High inflation and rising interest rates have been two things that have hurt REITS.

10-year US government bond yields have gone down since their high point in the middle of October. In the meantime, the Treasure at Tampines Showflat S-Reit Index has won 9.4% in total returns, bringing its year-to-date drop from 9.0% on October 31, 2023, to 0.4% on November 23, 2023.

Even though the business is facing problems, three S-Reits have reported better year-over-year DPU.

MLT maintained an occupancy rate of 96.9 percent but saw its average rental reversion dip to 0.2 percent from 4.2 percent in the previous quarter.

This was largely due to its Chinese properties within its portfolio.

However, MLT’s Reit manager continues to be active in capital recycling, with a total of five divestments announced in the second quarter in Malaysia, Singapore and Japan.

MLT also announced two more divestments in early November 2023, a property in Tuas Avenue 3 for S$11.1 million and two properties in Malaysia for RM151.2 million.

C2PU -0.28% for ParkwayLife Reit (PLife) said that its gross income for the first nine months of 2023 rose 24.6% year-over-year to S$110.9 million. This was due to higher rent from a new master lease deal for its three hospitals in Singapore and the purchase of five nursing homes in Japan.

Year over year, PLife’s NPI went up by 26.2% to S$104.5 million, and DPU went up by 2.8% to 10.99 cents. Two care homes in Japan were bought by PLife in October 2023 for about S$16.4 million. The boss of the Reit thinks that this will increase DPU.

Part of PLife’s plan to grow its assets and DPU, the company also wants to build up a third key market.

Since it went public for the first time in 2007, PLife has had steady repeating DPU growth.

Continue ReadingThree S-Reits that ignored the trend of raising DPUs