REIT's Near-Term Outlook Seems Uncertain After Tenants Default

Dow Jones
08/11

0628 GMT - ESR-REIT's near-term outlook appears uncertain aftertenants of three of its Australian properties defaulted on their rents, says DBS Group Research's Dale Lai in a note. These properties account for around 5.2% of ESR-REIT's effective gross rents as of end June, which is meaningful tenant exposure for the real-estate investment trust, the analyst says. While the immediate rental exposure could be partially mitigated by bank guarantees, Lai views this as a negative development for ESR-REIT, citing potential loss of future rental income and the duration of any vacancy across the affected properties. DBS cuts the REIT's rating to hold from buy and trims its target price to 2.80 Singapore dollars from S$3.10. Units are up 1.2% at S$2.48.

 

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