Daiwa House Logistics Trust AGM 2026: Key Investor Takeaways

Introduction

Daiwa House Asset Management Asia Pte. Ltd., the manager of Daiwa House Logistics Trust (DHLT), has released its responses to substantial and relevant questions from the Securities Investors Association (Singapore) (SIAS) ahead of its Annual General Meeting (AGM) scheduled for 24 April 2026. The responses provide deep insights into the REIT’s performance, portfolio challenges, capital management, and strategic direction. Investors should pay close attention to several operational, financial, and market factors that may impact the trust’s unit price.

Key Operational Highlights and Concerns

Portfolio Valuation and Occupancy Issues

• Valuation of D Project Kuki S: The warehouse in Saitama saw its valuation fall from JPY 1,346 million at acquisition to JPY 938 million as at end-2025, despite being fully occupied. The primary reason is a reducing land tenure, expiring in July 2034 (now with just 9 years remaining). While there are no quality concerns and the tenant extended their lease for another 10 years in 2024, the finite land tenure continues to weigh on independent valuations. Upon expiry, DHLT may negotiate for an extension or seek to acquire the land, subject to the landowner’s agreement.
• Occupancy Decline: Overall portfolio occupancy dropped from 100% in 2023 to 97.6% in 2024, and further to 87.8% in 2025. Two assets—DPL Sendai Port and DPL Koriyama—were notable for low occupancy rates of 31.9% and 74.6% respectively. These two assets comprise 20.3% of the portfolio by value, having a significant impact on overall performance.
  • DPL Sendai Port: Leasing challenges are due to the large unit sizes (each ~15,000 sqm). Market demand has mostly been for smaller units, making it difficult to re-let vacated spaces. Asset enhancement was considered but deemed unfeasible due to high costs and downtime. Some progress was made with one lease renewal and partial filling at higher rents.
  • DPL Koriyama: The manager believes current low occupancy is transitory, noting occupancy has fluctuated between 66.6% and 100% since IPO. Four leases in 2025 showed a strong 12% weighted average rent reversion, indicating robust underlying demand for quality space.
• Leasing Initiatives: The manager is working with the property manager, sponsor’s network, and third-party agencies to restore occupancy. However, the timeline for leasing vacant space is uncertain, and asset recycling remains an option to enhance portfolio performance.

Financial and Market Risks

Interest Rate and Currency Risks

• Impact of Rising Interest Rates: The Bank of Japan’s ongoing rate hikes have increased DHLT’s borrowing costs, but also led to relatively stable property capitalisation rates and valuations. A 1.5% rise in rates for JPY 12 billion of borrowings maturing in FY2026 would reduce FY2025 DPU by about 4% (pro-forma, excluding FX and portfolio performance).
• Debt Profile: 99.3% of borrowings are fixed-rate with a weighted debt maturity of 2.9 years. Upcoming refinancing in FY2027 and FY2028 represents 4.6% and 16.1% of debt respectively. All borrowings are JPY-denominated, providing a natural hedge for the predominantly JPY asset base.
• Currency Exposure: Since IPO, the JPY/SGD has depreciated by 31%, driving a 14.5% drop in NAV per unit (from S\$0.76 to S\$0.65). While the decline was partly offset by fair value gains on properties, FX remains a significant risk for NAV and reported performance.
• NAV Bridge Analysis (FY2022-FY2025):
  • Fair value gains: 24.5% (2022), 2.6% (2023), 2.2% (2024), 2.8% (2025)
  • Forex impact: -18.7% (2022), -7.9% (2023), -7.2% (2024), -6.0% (2025)
  • Other factors: Minimal equity change, minor net income/other adjustments

Market Performance and Strategic Initiatives

• Share Price & Discount to NAV: DHLT units trade below S\$0.50, with a reported NAV of S\$0.65 as at December 2025—implying a price-to-book of ~0.77. Since IPO at S\$0.80, total unitholder return was -12.5%, underperforming S-REIT logistics/industrial peers (median: -4.8%) and the Lion-Phillip S-REIT ETF (-4.4%). DHLT outperformed 3 out of 7 logistics S-REIT peers, though its underperformance is notable.
• Reasons for Discount: Key factors identified include the persistent JPY depreciation, higher interest rates in Japan, and increased portfolio vacancy. These may continue to affect market perception until resolved.
• Strategic Responses:
  • Systematic FX hedging to smooth income volatility; diversification outside Japan via new Vietnam asset (D Project Tan Duc 2).
  • Maintaining high fixed-rate debt proportion to manage rate risk.
  • Ongoing efforts to improve occupancy at Sendai Port and Koriyama, with 16 out of 19 assets fully occupied and strong rent reversions (+11% in 2025).
  • Acquisition of 5 additional high-quality properties since IPO at attractive discounts, diversifying income streams and tenant base.
  • Exploring alternative capital sources (hybrid securities, bonds), asset recycling, and highly selective, value-accretive acquisitions.

What Investors Should Watch

• Significant exposure to JPY/SGD FX risk, which can continue to affect NAV and reported returns, regardless of stable operational performance in local currency.
• Persistent vacancies in two major assets are weighing on income and could be price-sensitive if not addressed.
• Interest rate cycle in Japan is adding to debt costs, though currently well-managed via fixed-rate borrowings.
• Potential for asset recycling or strategic divestments/acquisitions, which could be value accretive and move the share price if executed under favourable conditions.
• Continued diversification into non-Japan markets (e.g., Vietnam) may gradually reduce FX risk and improve income stability.

Conclusion

While DHLT faces several macroeconomic and asset-specific headwinds, the manager has outlined active steps to mitigate risks and enhance portfolio value. Investors should monitor progress on vacancy reduction, further diversification, and capital management strategies. Any significant developments in these areas could materially impact the trust’s market valuation.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should perform their own due diligence and consult with qualified advisors before making any investment decisions. Past performance is not indicative of future results. All forward-looking statements involve risks and uncertainties. Actual results may differ materially from those projected.

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