Credit Update: Picking up close to 4% SGD perpetual yields from AIMS APAC REIT

Data as of 31 March 2026.
Source: Company Data, iFAST Compilations.

Chart 2: Consistent positive rental reversions experienced from FY2021 to FY2026 

Data as of 31 March 2026.
Source: Company Data, iFAST Compilations. 

High-quality and diversified industrial portfolio anchors debt-servicing capacity 

We continue to like AAREIT's portfolio of high-quality industrial and logistics assets, which remains well diversified across the logistics and warehouse, hi-tech, industrial and business park segments. AAREIT derives approximately 76.5% of its gross rental income ("GRI") from Singapore and 23.5% from Australia, providing a degree of geographical diversification and reducing reliance on any single market. Furthermore, logistics and warehouse assets contribute approximately 47.4% of GRI (chart 3 below), benefiting from long-term structural demand drivers such as e-commerce growth and supply chain optimisation. Approximately 98% of single-user leases also contain built-in rental escalations ranging from 2.0% to 3.25% per annum, providing embedded organic growth and a degree of earnings visibility.

We also like AAREIT's diversified and high-quality tenant base. The REIT has more than 180 tenants across a broad range of industries, with approximately 82.9% of tenants operating in defensive sectors such as logistics, food manufacturing, healthcare and telecommunications. The portfolio is anchored by several high-quality tenants, including Woolworths Group, DB Schenker, DHL Supply Chain, CEVA Logistics, NTT Singapore and Sanofi, among others. Collectively, the top 10 tenants account for approximately 49.5% of GRI (see chart 4 below), while the largest tenant contributes less than 10% of portfolio income. In our view, the presence of large multinational corporations and market leaders, coupled with the absence of excessive tenant concentration, should continue to support earnings stability and reduce counterparty risks.

We also take comfort from the quality of AAREIT's Australian assets. Although accounting for only 28% of portfolio value, the Australian portfolio contributes approximately 23.5% of GRI and continues to benefit from long lease tenures and full occupancy. In addition, management highlighted that two of its New South Wales assets have been endorsed by the New South Wales Government's Investment Delivery Authority for potential data centre development. We think the potential to reposition selected assets towards digital infrastructure uses enhances the long-term relevance of these assets and provides additional redevelopment flexibility.

Looking ahead, management expects operating conditions in both Singapore and Australia to remain broadly stable, supported by healthy demand for modern logistics and industrial assets and continued leasing opportunities across the portfolio. While trade-related uncertainties and a softer macroeconomic environment could moderate tenant expansion plans in certain segments, we believe AAREIT's high-quality assets, diversified tenant base and exposure to defensive industries should continue to underpin resilient operating performance and cash flow generation over the medium term. Furthermore, the REIT's active asset management initiatives and embedded redevelopment opportunities should help preserve the long-term relevance and competitiveness of its portfolio.

Chart 3: Breakdown of FY2026 GRI from different asset classes

Data as of 31 March 2026.
Source: AAREIT FY2026 Investor Presentation, iFAST Compilations. 

Chart 4: Diversified tenant mix breakdown

Data as of 31 March 2026.
Source: AAREIT FY2026 Investor Presentation, iFAST Compilations. 

Improving credit profile supported by a conservative balance sheet and disciplined capital recycling 

We continue to view AAREIT's conservative balance sheet as one of its key credit strengths. As shown in Table 1 below, aggregate leverage has declined meaningfully over the past five financial years, falling from a peak of 37.5% in FY2022 to 26.8% in FY2026, with total borrowings falling consistently over time (see chart 5 below). Importantly, this deleveraging was achieved despite the REIT continuing to pursue acquisitions and asset enhancement initiatives, demonstrating management's disciplined approach towards capital allocation and balance sheet management. At its current leverage level, AAREIT maintains debt headroom of more than S$1.1b before reaching MAS' regulatory limit of 50%.

On a pro forma basis, treating the outstanding perpetual securities (excluding the S$250m perpetual securities due September 2026 that are expected to be redeemed) as debt would increase aggregate leverage to approximately 44.4%, still comfortably below the regulatory limit.

Liquidity remains healthy: as of 31 March 2026, AAREIT maintained a total available liquidity of S$263.4m, comprising S$53.2m in cash and S$210.2m of committed unutilised credit facilities. Subsequent to FY2026, the REIT also secured an additional S$450m and A$275m of committed credit facilities, further strengthening its liquidity profile. The logistics specialist also retains a sizeable pool of unencumbered assets of approximately S$1.66b, providing additional financial flexibility during periods of market stress. Meanwhile, outstanding borrowings stood at approximately S$570m, of which S$115m is due within the next 12 months (currently under active discussion for refinancing). Looking at Chart 6 below, we find comfort in the REIT’s well-staggered debt maturity profile and do not foresee any material near-term refinancing pressures.

As seen in Table 1 below, AAREIT’s debt servicing metrics have also remained resilient despite a significantly higher interest rate environment. Although the blended cost of debt increased from 2.7% in FY2022 to 4.1% in FY2026, the interest coverage ratio (ICR) remained above 2.0x throughout the period and improved to 2.7x in FY2026. In our view, this demonstrates the resilience of AAREIT's underlying cash flows and its ability to absorb higher funding costs without materially weakening its credit profile.

Finally, we highlight management's continued execution of its capital recycling strategy, alongside the absence of significant near-term committed capital expenditure requirements, as a credit positive. During FY2026, AAREIT divested 3 Toh Tuck Link and 8 Senoko South Road at premiums of 32.5% and 11.1% to their respective valuations and subsequently redeployed capital into higher-quality assets and asset enhancement initiatives, including the acquisition of 2 Aljunied Avenue 1 and the completion of enhancement works at selected properties. We view the REIT's ability to recycle capital while simultaneously reducing leverage as evidence of prudent capital allocation and disciplined balance sheet management.

Chart 5: Since peaking in FY2022, total gross debt has been declining despite the continued pursuit of acquisitions

Chart 6: Debt obligations are comfortably spread across the upcoming financial years 

Data as of 31 March 2026.
Source: Company Data, iFAST Compilations. 

Table 1: Resilient credit metrics through the cycle 

Overall, AAREIT’s credit profile has improved compared to FY2025, underpinned by lower leverage and improving debt coverage. Looking ahead, management remains focused on maintaining a prudent capital structure while continuing to pursue value-accretive acquisitions and asset enhancement initiatives in a disciplined manner. We believe AAREIT's conservative leverage profile, resilient interest coverage metrics, ample liquidity and proactive liability management position the REIT well to navigate potential market volatility and upcoming refinancing requirements. Coupled with its demonstrated ability to recycle capital while preserving balance sheet strength, we expect the REIT to maintain healthy financial flexibility and stable credit metrics over the medium term.

In Table 2 above, we compare AAREIT 4.100% Perpetual Corp (SGD) against perpetuals issued by its peers (EREIT, MLTSP, and MINTSP). These peers have businesses like AAREIT's, with logistics and/or industrial exposure. In general, AAREIT’s perpetual offers a 3.91% yield to worst with 4.56 years to next call. This presents a decent yield pickup of close to 70bps against the issues by Mapletree, largely due to the investment-grade ratings of the latter (AAREIT’s perpetual is unrated). We note that EREIT 6.000% Perpetual Corp (SGD) offers a high yield due to its relatively softer credit profile compared to AAREIT.

We emphasise that perpetual securities inherently carry non-call risks, especially given the relatively modest reset margin compared to AAREIT’s existing perpetuals. Nevertheless, AAREIT has historically exercised its call options, and the economics of the current structure appear to favour redemption at the first call date. While this provides some comfort, investors should remain cognisant that the issuer retains full discretion over the exercise of the call option. Other typical clauses include non-cumulative deferral and dividend-stopper clauses.

Investors who are comfortable with these perpetual-related risks and are looking for quality income from a solid issuer may consider picking up this AAREIT 4.100% Perpetual Corp (SGD), considering AAREIT’s resilient credit profile and the decent yield pickup relative to peers.

Disclosure: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds positions in AAREIT 4.100% Perpetual Corp (SGD) and the analyst who produced this report holds a NIL position in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.