ESR REIT: FY25 Results: Organic income growth will be key to core earnings
Related Stories
- FY25 DPU of 21.914Scts supported by core earnings growth; in line with our projections
- Healthy positive rental reversions of +11.7% reported in FY25
- Near-term fluctuations in earnings with ongoing divestments, but will lead to longer-term earnings stability and organic growth potential
- Maintain BUY with TP of SGD3.20
Gross revenue and NPI increased meaningfully in FY25, supported by recent acquisitions and firmer leasing economics. Gross revenue rose 20.4% y/y to SGD446.0mn and NPI increased 25.6% y/y to SGD328.7mn, helped by contributions from ESR Yatomi Kisosaki Distribution Centre and 20 Tuas South Avenue 14 (both acquired in Nov 2024), positive rental reversions on renewals, and incremental income from AEI-completed assets including 16 Tai Seng Street and 21B Senoko Loop.
Distributions were more moderate than the property-level uplift as higher funding and structural costs took their share, but DPU still advanced. 2H25 total DPU increased 7.1% y/y to 10.675Scts, while FY25 total DPU rose 3.4% y/y to 21.914Scts. Most notably, core DPU increased 7.6% y/y, with core DPU now accounting for c.98% of total DPU. The growth in distributable income was partly offset by higher borrowing and perpetual securities costs (largely tied to acquisition funding), non-controlling interests associated with the 49% holders of 20 Tuas South Avenue 14, and higher tax expenses, while the unit base was higher due to the preferential offering completed in 4Q24, partly offset by buybacks in 1H25.
Occupancy improved 80bps q/q, and rental reversions remained strong at +11.7%. Portfolio occupancy was 91.1% in 4Q25, a c.80bps improvement q/q. Leasing activity totalled 463,760 sqm in FY25, with renewals forming 70.8% of leasing and new leases contributing 29.2%. Rental reversions remained a key earnings lever, led by the portfolio’s “new economy” exposure. FY25 rental reversion was +11.7% (FY24: +10.3%), with outsized performance in high-specifications industrial (+22.2%) and logistics (+12.4%). We note that FY25 rental reversion would have been +9.2% excluding the renewal of a particular 12-year lease at 7000 Ang Mo Kio Avenue 5.
More than SGD300mn in divestments to be completed in the near-term. EREIT announced the proposed divestment of eight non-core assets (aggregate SGD338.1mn) at 2.0% above valuation, alongside the Jan 2026 divestment of the non-core hotel strata lot at ESR BizPark @ Changi at valuation for SGD101.0mn, while retaining the business park, retail and convention centre components.
Leverage ticked up 10bps q/q, but financing metrics improved as debt cost eased a further 5bps q/q, with upcoming refinancing being secured on better terms. Gearing was 43.4% as at 4Q25, with a pro-forma c.38.5% assuming announced divestments were completed on 31 Dec 2025 and proceeds used to repay debt. All-in cost of debt reduced to 3.35%, interest coverage ratio was 2.5x, and 68.4% of borrowings were on fixed rates. Looking ahead, we understand that upcoming refinancing of SGD loans will see a c.30bps margin compression, supporting further savings in overall financing costs. Despite this, refinancing of JPY loans could partially offset some of the savings in FY26. Overall, financing costs is FY26 is expected to remain fairly stable at the current 3.3% levels.
AEIs remained the most visible organic growth driver, with one newly completed project still in its leasing ramp and another nearing completion. The AEI at 16 Tai Seng Street achieved TOP on 18 Jul 2025, added 2,793 sqm of high-specifications industrial space and was c.50% occupied as at 31 Dec 2025, with discussions ongoing for further take-up for a further c.20% of the proeprty. In parallel, the AEI at 29 Tai Seng Street was c.76% complete as at 31 Dec 2025, targets a yield-on-cost of c.6.4%, and remains on track for completion in 1H26.
Our views
Core earnings are expected to continue benefiting from organic growth, underpinned by higher portfolio occupancies and sustained positive rental reversions. Based on our understanding, rental reversions in FY26 should remain firmly positive and are likely to average in the mid-single-digit range, providing a steady uplift to income. In addition, AEIs will contribute another layer of organic growth. The recently completed AEI at 16 Tai Seng has begun to support earnings, while the upcoming completion of the AEI at 29 Tai Seng should further enhance rental income and asset quality.
Looking further ahead, EREIT plans to commence the redevelopment of 2 Fishery Port in 4Q26. This redevelopment, with an estimated capital expenditure of SGD200–250mn and a construction period of up to 30 months, is expected to deliver a stabilised yield of c.7.0% upon completion, reinforcing longer-term earnings growth. In the near term, however, earnings may experience some q/q volatility as impending divestments are completed and before proceeds are fully redeployed into higher-quality core assets.
That said, EREIT continues to actively pursue accretive logistics assets in Australia and Japan, primarily from its Sponsor, which should support the portfolio’s income profile over time. Taking into account the ongoing portfolio recalibration and the timing mismatch between asset divestments and capital redeployment, we expect FY26 DPU growth to remain relatively muted at c.+0.5%. Nevertheless, we remain positive on EREIT’s strategy and execution, and reiterate our BUY recommendation with an unchanged target price of SGD3.20.
Access more at DBS Insights Direct
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere.
There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
General | This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. |
Australia | This report is being distributed in Australia by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. DBS Bank Ltd, DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. |
Hong Kong | This report has been prepared by a personnel of DBS Bank, who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited (''DBS HK''), a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore. For any query regarding the materials herein, please contact Dennis Lam (Reg No. AH8290) at [email protected] |
Indonesia | This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. |
Malaysia | This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. |
Singapore | This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6878 8888 for matters arising from, or in connection with the report. |
Thailand | This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. For any query regarding the materials herein, please contact Chanpen Sirithanarattanakul at [email protected] |
United Kingdom | This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Bank Ltd, London Branch (“DBS UK”). DBS Bank Ltd is regulated by the Monetary Authority of Singapore. DBS UK is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. In respect of the United Kingdom, this report is solely intended for the clients of DBS UK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS UK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. |
Dubai International Financial Centre | This communication is provided to you as a Professional Client or Market Counterparty as defined in the DFSA Rulebook Conduct of Business Module (the "COB Module"), and should not be relied upon or acted on by any person which does not meet the criteria to be classified as a Professional Client or Market Counterparty under the DFSA rules. This communication is from the branch of DBS Bank Ltd operating in the Dubai International Financial Centre (the "DIFC") under the trading name "DBS Bank Ltd. (DIFC Branch)" ("DBS DIFC"), registered with the DIFC Registrar of Companies under number 156 and having its registered office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS DIFC is regulated by the Dubai Financial Services Authority (the "DFSA") with a DFSA reference number F000164. For more information on DBS DIFC and its affiliates, please see http://www.dbs.com/ae/our--network/default.page. Where this communication contains a research report, this research report is prepared by the entity referred to therein, which may be DBS Bank Ltd or a third party, and is provided to you by DBS DIFC. The research report has not been reviewed or authorised by the DFSA. Such research report is distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS DIFC. Unless otherwise indicated, this communication does not constitute an "Offer of Securities to the Public" as defined under Article 12 of the Markets Law (DIFC Law No.1 of 2012) or an "Offer of a Unit of a Fund" as defined under Article 19(2) of the Collective Investment Law (DIFC Law No.2 of 2010). The DFSA has no responsibility for reviewing or verifying this communication or any associated documents in connection with this investment and it is not subject to any form of regulation or approval by the DFSA. Accordingly, the DFSA has not approved this communication or any other associated documents in connection with this investment nor taken any steps to verify the information set out in this communication or any associated documents, and has no responsibility for them. The DFSA has not assessed the suitability of any investments to which the communication relates and, in respect of any Islamic investments (or other investments identified to be Shari'a compliant), neither we nor the DFSA has determined whether they are Shari'a compliant in any way. Any investments which this communication relates to may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on any investments. If you do not understand the contents of this document you should consult an authorised financial adviser. |
United States | This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. |
Other jurisdictions | In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. |
HONG KONG | SINGAPORE |
INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: William Simadiputra DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: 62 21 3003 4900 Fax: 6221 3003 4943 e-mail: [email protected] | THAILAND |