Daiwa House Logistics Trust - Lower DPU due to higher interest cost and weaker JPY

REITs

By Gerald Wong, CFA • 16 Aug 2026

Global Wealth Technology Pte. Ltd. is regulated by the Monetary Authority of Singapore (MAS) as a licensed Financial Adviser.

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Daiwa House Logistics Trust reported 1H26 distribution per unit declined 18.8% year-on-year to 1.82 cents. The weaker performance was mainly due to higher vacancy in the Japan portfolio, particularly at DPL Sendai Port and DPL Kawasaki Yako, as well as the weaker JPY against SGD.

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Lower 1H FY26 DPU due to higher vacancy and interest expense

1H FY26 distribution per unit (DPU) declined 18.8% year-on-year to 1.82 cents. With 2H FY25 DPU of 2.09 cents, the trailing twelve month DPU of 3.91 cents translates to distribution yield of 8.5%.

1H FY26 distributable income declined by 18.5% year-on-year to S$12.8 million. The weaker performance was mainly due to higher vacancy in the Japan portfolio, particularly at DPL Sendai Port and DPL Kawasaki Yako, as well as the weaker JPY against SGD.

Higher interest expenses following the refinancing in November 2025 and additional borrowings for DPL Gunma Fujioka also weighed on distributable income.

The distribution will be paid on 28 September 2026, with an ex-date of 13 August and record date of 14 August.

1H26 net property income hit by higher vacancy and weaker JPY

Gross revenue declined 11.8% year-on-year to S$25.7 million, while net property income (NPI) fell 13.4% year-on-year to S$19.5 million.

The decline was primarily attributable to lower occupancy in the Japan portfolio - particularly at DPL Sendai Port, which was still only 31.9% occupied as at 30 June 2026, and DPL Kawasaki Yako.

These were partially offset by the full six-month contribution from DPL Gunma Fujioka, which was acquired in March 2025.

Rental income declined 12.3% year-on-year to S$23.0 million, while property expenses fell 6.6% year-on-year to S$6.2 million in line with lower occupancy.

The weaker JPY was another drag on reported results, with the currency declining approximately 9.6% against SGD year-on-year. In local currency terms, Japan portfolio NPI declined 4.6% year-on-year, mainly due to higher vacancies.

The Vietnam portfolio remained relatively resilient. NPI from D Project Tan Duc 2 was 0.4% year-on-year lower in VND terms. Cash-basis NPI increased 2.7% year-on-year due to built-in rental escalations.

Distributable income declined more sharply than NPI, falling 18.5% year-on-year to S$12.8 million.

Finance expenses increased 8.5% year-on-year to S$4.925 million, reflecting additional borrowings for DPL Gunma Fujioka and higher rates following the November 2025 refinancing.

Portfolio performance weakened due to lower occupancy

AUM declined 2.9% from end-2025 to S$811.1 million as at 30 June 2026. Portfolio valuation was lower due to weaker Japanese Yen and Vietnamese Dong against the Singapore Dollar.

Portfolio occupancy was unchanged at 87.8% as at 30 June 2026, with the Japan portfolio at 87.3% and the Vietnam property at 100%.

The main weakness remains DPL Sendai Port, which was only 31.9% occupied at end-June. The Manager is exploring various options for the property, including asset recycling.

There were some encouraging developments after the reporting period. Vacancy at DPL Koriyama was partially backfilled in July, lifting the property's occupancy to 92.3%.

Overall portfolio occupancy subsequently improved to 88.5% as at 31 July 2026. Discussions with a potential tenant for the vacant unit at DPL Kawasaki Yako are also progressing.

The portfolio continues to benefit from a relatively long lease profile. WALE stood at 6.1 years, with more than 50% of leases expiring in 2030 or later.

Japan portfolio WALE was 5.5 years, while the Vietnam portfolio had a much longer WALE of 17.3 years.

Update on leasing activities

Rental reversions remained positive, with two leases renewed during 1H FY2026 at an average rent uplift of 5.6%.

expiring in 2H FY2026, representing approximately 10% of portfolio NLA, although tenants for four of these leases, representing around 9% of portfolio NLA, have indicated their intention to renew.

Balance sheet remains manageable, but refinancing costs are rising

DHLT's aggregate leverage was relatively stable at 40.1% as at 30 June 2026. Importantly, 99.3% of borrowings were fixed-rate and none of the properties were encumbered.

The weighted average debt tenure was 2.4 years.

Refinancing needs will increase towards year-end, with around JPY12 billion of borrowings maturing in late 2026. This includes the repricing of the JPY perpetual securities in November 2026.

These borrowings were raised during Japan's negative interest rate environment and are expected to be refinanced at higher rates.

The Manager intends to take a balanced approach to borrowing tenure to manage the increase in financing costs.

The balance sheet also showed some decline in NAV per unit, with NAV per unit falling to S$0.63 as at 30 June 2026 from S$0.65 at end-2025.

Investment properties were valued at S$952.5 million, compared with S$984.1 million at end-2025.

DHLT has some liquidity buffer, with total available unsecured facilities increasing to S$100 million as at 30 June 2026, from S$60 million at end-2025.

Interest coverage was at 4.8x as at 30 June 2026, indicating solid debt servicing capacity.

Maintain Neutral and revise target price to S$0.50

Daiwa House is trading at S$0.46, implying FY26E distribution yield of 8.9%.

Daiwa House is trading at a price-to-book ratio of 0.87x, which we believe fairly reflects its smaller scale. In comparison, CapitaLand Ascendas REIT and Mapletree Logistics Trust are trading at PB 1.24x and 0.91x.

We maintained Neutral on Daiwa House and revised the target price to S$0.50, from S$0.57 previously. This reflects the higher long-term bond yield on the discounted dividend model.

We expect a modest uplift in DPU over the next twelve months, supported by occupancy recovery and the full-year contribution from DPL Gunma Fujioka. This should be partly offset by higher refinancing costs and continued JPY weakness.

Management expects continuing JPY weakness even after the early-August coordinated Japan–US intervention provided some relief — DHLT says it will keep hedging JPY exposure in a disciplined, systematic manner.

Daiwa House Logistics REIT on Beansprout’s REIT Income Pot framework

We apply Beansprout's REIT screening framework, covering DPU growth, gearing, and yield versus risk-free rates - to assess whether Daiwa House Logistics REIT (“DHLU”) is suitable for an income-focused portfolio.

Check	Daiwa House Logistics REIT
DPU growth – able to generate stable earnings	❌ Fail — 1HFY26 DPU 1.82 cents, -18.8% year-on-year
Aggregate leverage < 45%	✅ Pass — 40.1% as at 30 June 2026
Dividend yield > 5%	✅ Pass —trailing twelve months DPU of 3.91 cents, translating to a distribution yield of 8.5% at the 12 Aug closing price of S$0.46
Overall	2/3 checks
Source : Beansprout

Check #1: DPU declined

1H FY2026 DPU of 1.82 cents was 18.8% lower year-on-year, with gross revenue -11.8% and NPI -13.4%.

DHLU faced operating challenges with persistently high portfolio vacancy rates at weaker assets like DPL Sendai Port. In addition, higher interest expenses and weaker JPY contributed to lower distributable income.

Check #2: Gearing ratio at an acceptable level

Aggregate leverage stood at 40.1% as at 30 June 2026, down from 40.6% as at 31 March 2026 and well within Beansprout's preferred gearing threshold.

Interest coverage ratio of 4.8x and a well-balanced debt profile further support balance sheet resilience. DHLU has S$100 million of available unsecured facilities.

Check #3: Distribution yield remains attractive

Trailing-twelve-month DPU of 3.91 cents (1H FY26’s 1.82 cents plus 2H FY25’s 2.09 cents), against the 12 August 2026 closing price of S$0.46, implies a distribution yield of 8.5%.

Currently, Singapore Savings Bond is offering about 2.1% and 6-month T-bill is offering around 1.6%.

DHLU is trading at a spread of 6.4% to 6.9% over risk-free rates. This is above Beansprout's preferred minimum spread of about 3 percentage points, compensating investors for DHLU’s JPY exposure and higher refinancing cost.

What do we watch out for?

DHLU passes two of the three checks under the Income Pot framework. Investors should monitor the backfilling at some assets - DPL Sendai Port 31.9% occupied, DPL Koriyama 92.3% occupied and DPL Kawasaki Yako 90%.

Overall, the 1H FY2026 results were weak, but there are some early signs of stabilisation in occupancy. The 5.6% average rental uplift, long 6.1-year WALE and 99.3% fixed-rate borrowings provide some support.

We see occupancy recovery and the outcome of the DPL Sendai Port asset-recycling review as the key swing factors for DHLT's earnings trajectory, while refinancing at higher rates remains a near-term pressure on DPU.

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