Singapore remains ESR-REIT’s core as portfolio strategy evolves

The manager outlines portfolio repositioning, higher hedging and divestment plan ahead of AGM.

Singapore remains ESR-REIT‘s largest market, supported by stable occupier demand and ongoing portfolio repositioning, it said in written responses to unitholder questions ahead of its annual general meeting (AGM) on 24 April.

It added that it is managing interest rate exposure through higher hedging levels and continued divestment of non-core assets.

Singapore continues to form the core of ESR-REIT’s portfolio, with industrial assets benefiting from steady demand conditions, noting that rental growth is expected to moderate over the next two years due to supply and demand dynamics.

As at 31 March, ESR-REIT Management (S) Ltd reported that 66.1% of borrowings were hedged, with the hedge ratio expected to rise to around 70% after divestments are completed. This reduces exposure to interest rate movements on unhedged debt, according to the report.

In Singapore, the manager said the portfolio is largely made up of leasehold industrial assets, which are affected by land lease decay over time. It said this has been managed through divestments and redevelopment activity aimed at improving portfolio quality.

Short land lease assets are expected to decline to around 4% to 6% of portfolio value after planned asset sales and repositioning initiatives.

The report also highlighted ongoing asset enhancement initiatives in Singapore, including redevelopment works and upgrades intended to support asset performance and portfolio value.

ESR-REIT Management (S) Ltd said divestment proceeds will be used mainly for debt reduction in the interim before redeployment, with continued focus on maintaining prudent leverage and portfolio resilience.