ESR-Logos REIT: Business Update in Line; Active Capital Management To Improve Balance Sheet

We retain our fair value estimate of SGD 0.38 per unit for ESR-Logos REIT following an in-line business update. First-quarter 2023 net property income grew 78.2% year on year on the back of a 63.9% year-on-year increase in revenue due to the merger with ARA Logos Trust in April 2022. Portfolio occupancy rate declined slightly to 92.1% this quarter from 92.7% in the previous quarter due to a nonrenewal of a general industrial tenant in Singapore. This was slightly below our expectation as we have modeled an average portfolio occupancy rate of 94.3% for 2023 with the assumption that the trust’s Singapore office portfolio will improve its occupancy rate to an average of 92% for 2023 as compared with 91.3% registered in 2022. Nevertheless, we think that this is just a transitional vacancy and expect occupancy rates for its Singapore industrial properties to pick up in the coming quarters. Rental reversion numbers continue to come in strong for the trust with a positive 7.3% rental reversion. As the trust’s portfolio passing rent remains below market levels, management expects to continue to deliver positive rental reversions for upcoming expiries.