First REIT 1Q 2026 Business Update: Comprehensive Analysis for Investors

Executive Summary

First REIT Management Limited has released its business update for the three months ended 31 March 2026, delivering several significant announcements that are highly relevant for investors and have the potential to impact share price and market sentiment. The report covers financial performance, strategic divestments, capital management actions, and a detailed outlook on macroeconomic and currency risks.

Key Financial Highlights

• Distribution Per Unit (DPU): 0.50 Singapore cents for 1Q 2026 (down from 0.58 cents in 1Q 2025).
• Rental and Other Income: S\$23.2 million, a decline of 8.4% year-on-year.
• Net Property and Other Income: S\$22.5 million, down 8.3% year-on-year.
• Distributable Amount: S\$10.6 million, a 12.5% reduction compared to 1Q 2025.
• Net Asset Value (NAV) per Unit: 24.42 Singapore cents as at 31 March 2026, decreased from 24.97 cents at end-December 2025.
• Gearing Ratio: Increased to 44.6% (from previous periods), with 44.2% of debt portfolio on fixed rates or hedged.
• Interest Coverage Ratio: 4.4 times.
• Cost of Debt: Improved to 3.9% from 4.7% a year ago.
• Upcoming Distribution: Payment is scheduled for 26 June 2026, with an ex-distribution date of 7 May 2026.

Key Price-Sensitive Developments and Strategic Review

• First REIT announced a series of major divestments (the “Proposed Divestments”) totalling S\$471.5 million, representing a 2.1% premium to the aggregate valuation of the assets.
  • Eight Hospital Divestments: To PT Siloam International Hospitals Tbk and subsidiaries for IDR 5.1 trillion (~S\$389.2 million), at a 2.8% premium to average recent valuations.
  • Two Non-Core Asset Divestments: To PT Lippo Karawaci Tbk for S\$53.3 million (Lippo Plaza Baubau and Hotel Aryaduta Manado).
  • Conditional Prepaid Lease: Commercial rights to PT Bumi Sarana Sejahtera (for Lippo Plaza Kupang) for S\$29.1 million.
• Put Option Agreements have been signed for the potential divestment of the remaining six Indonesia hospitals, unlocking up to IDR 3.9 trillion (~S\$294.8 million), subject to First REIT’s discretion and unitholders’ approval.
• The strategic move aims to eliminate IDR/SGD currency volatility and income drag, thus potentially stabilising DPU and enhancing capital recycling for growth.
• Leverage Impact: Post-divestment, aggregate leverage is expected to drop significantly to 16.7%, from the current 44.6%, following repayment of certain secured loans and debt securities.
• Special Distribution: The Board intends to declare a Special Distribution of approximately S\$9.7 million over the two quarters following completion of the Proposed Divestments.
• Unitholder Approval: Unitholders will vote on the Proposed Divestments at an Extraordinary General Meeting provisionally scheduled for June 2026. Separate approval will be required for the Put Option Divestments if exercised.
• Rental Arrears Recovery: Full recovery of current rental arrears (~S\$6.6 million) from PT Metropolis Propertindo Utama is expected in connection with the transaction.
• Capital Structure Actions: Extension of S\$300 million term loan and revolving credit facilities by 12 months to May 2027. Ongoing refinancing discussions for a Japanese Yen-denominated loan due September 2026.

Macroeconomic Environment and Currency Risks

• Indonesian Rupiah and Japanese Yen have depreciated sharply against the Singapore Dollar, directly affecting income and DPU.
• Bank Indonesia has intervened to support the Rupiah, resulting in declining foreign exchange reserves.
• Bank of Japan maintains accommodative policy due to negative real interest rates and economic risks from global conflicts.
• Monetary Authority of Singapore has tightened policy, strengthening the SGD—further pressuring IDR and JPY denominated assets.
• Global economic growth is forecasted to slow to 2.9% in 2026, with persistent volatility in energy prices, currency movements, and capital flows.

Distribution Details for 1Q 2026

• Total Distribution: 0.50 cents per unit
• Breakdown:
  • Taxable income: 0.04 cents per unit
  • Tax-exempt income: 0.05 cents per unit
  • Capital distribution: 0.41 cents per unit
• Ex-distribution date: 7 May 2026, 9:00 am
• Book closure date: 8 May 2026, 5:00 pm
• Payment date: 26 June 2026

Investor Takeaways

• The Proposed Divestments and Put Option Agreements constitute a major strategic repositioning and will significantly reshape First REIT’s portfolio, balance sheet, and risk profile. These transactions, once completed, will have a direct impact on leverage, income stability, and future growth opportunities.
• Currency risks remain elevated and may continue to affect distributions and net asset value until the divestments are completed and IDR/SGD volatility is eliminated from the portfolio.
• The announced Special Distribution and expected leverage reduction may be viewed as positive catalysts for the share price, subject to successful execution and approval by unitholders.
• Investors should pay close attention to the upcoming EGM in June 2026 and monitor for further announcements regarding the completion of the divestments and the exercise of Put Options.

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