AIMS APAC REIT: FY25/26 Results: Strong performance led by multiple organic growth levers
- FY2026 DPU rose 2.6% y/y to 9.850 Scts, supported by stronger operating performance, lower property expenses and reduced borrowing costs
- NPI outpaced revenue growth, rising 5.7% y/y, reflecting improved cost efficiency and positive rental reversions of +7.7%
- Portfolio quality improved through recently completed acquisitions and AEIs, with potential to transform two Australian assets into data centres in the medium-term
- Maintain BUY with a higher TP of SGD1.66
NPI grew c.6% y/y, underpinned by improvement in margins. Gross revenue rose 2.2% y/y to SGD190.7mn in FY26, while NPI increased at a faster pace of 5.7% y/y to SGD141.3mn, supported by positive rental reversions, contributions from the acquisition of 2 Aljunied Avenue 1, and lower property operating expenses arising from reduced electricity costs and operating efficiencies. The uplift was partly offset by the divestments of 3 Toh Tuck Link and 8 Senoko South Road during the year. On a 2H26 basis, gross revenue increased 4.1% y/y to SGD97.0mn, while NPI rose 10.3% y/y to SGD73.0mn, reflecting stronger operating leverage as property expenses declined 11.1% y/y. Results were broadly underpinned by resilient leasing demand across the Singapore industrial portfolio and stable income contribution from the Australian assets.
FY26 DPU of 9.85 Scts in line with our projections. DPU increased 2.6% y/y to 9.85 Scts in FY26, supported by the 3.1% y/y rise in distributions to unitholders to SGD80.6mn. The improvement came despite a 0.5% increase in units outstanding to 820.6mn units due to management fee units issuance and the introduction of the distribution reinvestment plan for 4Q26. Distribution growth was driven mainly by stronger operating income and lower borrowing costs, with finance expenses declining 12.2% y/y to SGD32.9mn following proactive refinancing initiatives and lower average debt balances. 2H26 DPU rose 4.1% y/y to 5.13 Scts, aided by improved profitability and lower fair value drag from investment properties and derivatives.
Committed occupancy improved 20bps to 96.8%. Portfolio occupancy remained stable at 93.6% as at 31 March 2026, unchanged y/y, although committed occupancy improved to 96.8% from 96.6% in the previous quarter. Leasing momentum remained healthy with 33 new leases and 65 renewals completed across over 2.3mn sqft, equivalent to 27.4% of portfolio NLA. Singapore assets continued to anchor portfolio stability, accounting for 76.5% of GRI, while the Australian assets maintained full occupancy backed by long leases. Key leasing achievements included the completion of AEIs at 15 Tai Seng Drive and 7 Clementi Loop, which secured a 10-year anchor tenant and a 15-year master lease respectively. Occupancy softness persisted at selected older industrial properties including 1A International Business Park, 10 Changi South Lane and 20 Gul Way, though management appears focused on asset rejuvenation and tenant repositioning initiatives to improve utilisation.
Healthy positive rental reversions of +7.7% in FY26. AAREIT achieved positive rental reversions of 7.7% across 98 leases in FY26, moderating from the exceptionally strong 20.0% achieved in FY25 but still reflecting healthy leasing conditions in Singapore industrial markets. Rental uplift was primarily driven by logistics and warehouse assets, particularly rejuvenated properties with improved specifications. Tenant retention improved to 69.5% from 64.8% previously, suggesting continued stickiness among occupiers despite elevated rental levels. Portfolio WALE eased slightly to 4.0 years from 4.4 years, though income visibility remains supported by long leases across key Australian assets and recent leasing completed at upgraded Singapore properties. The upcoming expiry profile appears manageable, with mark-to-market opportunities still available across older leases signed before the recent industrial rental upcycle.
Overall portfolio valuations increased by c.6%. Portfolio valuation increased 5.9% y/y or SGD125.8mn to SGD2.25bn as at 31 March 2026, driven by higher Singapore valuations, AUD appreciation and the acquisition of 2 Aljunied Avenue 1. Excluding the acquisition, management indicated the portfolio would still have recorded a c.3.0% uplift in valuation. NAV per unit correspondingly increased to SGD1.28 from SGD1.23. Revaluation gains were mainly concentrated within Singapore logistics and industrial assets, supported by rental growth and improved income assumptions. Capital recycling efforts also crystallised value, with 3 Toh Tuck Link divested at a 32.5% premium to valuation and 8 Senoko South Road sold at an 11.1% premium. These transactions reinforce continued institutional demand for quality Singapore industrial assets despite elevated macro uncertainty.
Ample debt headroom with low gearing of 26.8%. Aggregate leverage declined to 26.8% from 28.9% a year earlier, reflecting proceeds from divestments and perpetual securities issuance. Blended cost of debt improved to 4.1% from 4.3% y/y, while interest coverage ratio strengthened to 2.7x from 2.4x. The REIT proactively issued SGD150mn perpetual securities at 4.10% and SGD100mn perpetual securities at 4.25% during 4Q26, ahead of the redemption of existing SGD250mn perpetual securities due in September 2026. Fixed-rate borrowings accounted for 80% of total debt, providing protection against further rate volatility, while 69% of expected AUD distributable income was hedged into SGD via rolling forward contracts. Sensitivity analysis indicates every 25bps increase in interest rates would reduce annual DPU by approximately 0.03 Scts.
Our views
We remain positive on AAREIT, supported by its healthy portfolio fundamentals and multiple growth drivers. The REIT continues to benefit from positive rental reversions, declining financing costs, and potential for further accretive acquisitions, all of which underpin resilient earnings growth and portfolio performance. In addition, AAREIT’s healthy gearing level of c.27% provides ample debt headroom, positioning the REIT well to pursue further acquisition opportunities while maintaining balance sheet flexibility.
The pre-emptive issuance of perpetual securities in January and March 2026 is expected to result in a slight near-term drag on earnings ahead of the redemption of the SGD250mn tranche due in September 2026. However, the refinancing exercise is strategically beneficial over the longer term and is expected to generate annual savings of more than SGD3.0mn. Importantly, management executed the issuances at an opportune time, ahead of the recent geopolitical tensions in the Middle East that subsequently led to a rise in base interest rates.
AAREIT’s AEIs completed during the year have also contributed positively to organic income growth. Looking ahead, further upside could come from the potential repositioning of 2 Aljunied Avenue 1, which was recently acquired. Beyond Singapore, there is also emerging data centre optionality within its Australian portfolio, particularly at Macquarie Park and Bella Vista. Both sites have been endorsed by the New South Wales Government Investment Delivery Authority for potential future data centre development. This endorsement significantly enhances the redevelopment potential of the assets and could unlock medium-term value creation opportunities, especially amid rising demand for AI infrastructure and cloud computing capacity.
Following the roll forward of our valuations for AAREIT, we maintain our BUY recommendation with a higher target price of SGD1.66.
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