Industrial landlords deliver surprising 2Q12 results

Occupancy rate as at end-June stood at 98.4%, or a 60-bp improvement QoQ, while the weighted average lease to expiry held steady at 3.6 years.

In addition, the subsector aggregate leverage average was still comfortable at 33.5% (vs. 33.9% in 1Q).

According to OCBC Investment Research, the strong performance reflects active portfolio management and continued strong demand for industrial property.

Here's more from OCBC:

Industrial landlords continued to deliver, meeting expectations for 2Q12. YoY growth in NPI ranging from 3.9-26.4% was seen among the REITs, bolstered by contribution from completed developments/ acquisitions, positive rental reversions and improved operational performances.

Mapletree Industrial Trust was the top performer for the quarter, raking up 14.1% YoY increase in DPU.

This was followed closely by Cambridge Industrial Trust and Ascendas REIT, with 13.9% and 10.3% growth respectively.

Only AIMS AMP Capital Industrial REIT (AAREIT) and Cache Logistics Trust (CACHE) saw a sequential decline in DPU.

However, this was due to the absence of distribution in retained income seen in 1Q by AAREIT. For CACHE, we note that it was attributable to an enlarged unit base arising from private placement to fund the acquisition of Pandan Logistics Hub, even though the property has yet to contribute to its income.

Going forward, we believe that industrial REITs will likely maintain their financial performances. While most of the landlords acknowledge that the macroeconomic landscape has remained uncertain and
volatile, they expect stable results from their portfolios, driven by contribution from recent investments and healthy leasing activities in the industrial space. A few industrial REITs also cited the possibility of further positive rental reversions, as current market rents are still above the passing rents at some of
their assets.