DHLT 1Q FY2026: Occupancy Holds At 87.8%, Positive Reversion On 2Q Renewals, NPI -4.9% JPY On Vacancy Drag — Three Signals Beyond The Headline

Daiwa House Logistics Trust (DHLT) released its 1Q FY2026 business update on 13 May 2026 for the quarter ended 31 March 2026. No leases expired in the quarter. Portfolio occupancy held steady at 87.8%, with 16 of 19 properties at full occupancy. Japan NPI fell 4.9% in JPY terms on vacancy drag at three specific properties; SGD NPI fell 12.4% on FX translation. The constructive signal: of three leases expiring in 2Q FY2026, one has already been renewed and a second is expected — both at higher rent. Aggregate leverage 40.6%, ICR 5.1x, 99.3% fixed-rate. Three signals beyond the headline.

Financial Headlines

NPI Japan portfolio (JPY terms) -4.9% YoY — DPL Gunma Fujioka contribution (acquired March 2025) offset by vacancies at DPL Sendai Port, DPL Koriyama, and DPL Kawasaki Yako. Vietnam NPI (VND terms) stable YoY; cash-basis NPI +2.7% on built-in rent escalation at D Project Tan Duc 2. Overall portfolio NPI (SGD) -12.4% YoY — FX translation drag from weaker JPY and VND against SGD. Aggregate leverage 40.6% (marginal increase from 40.2% at 31 December 2025, driven by March 2026 cash distribution — not new borrowings). ICR 5.1x, well above MAS 1.5x threshold. Fixed-rate borrowings 99.3%. 100% unencumbered portfolio. Undrawn facilities S$100M (S$60M at year-end, increased by S$40M with additional facility entered January 2026).

Portfolio Occupancy

Portfolio occupancy unchanged at 87.8% as at 31 March 2026 — identical to the 31 December 2025 close, reflecting zero lease expiries in 1Q FY2026. 16 of 19 properties remain at full occupancy. The three partial-vacancy properties are DPL Sendai Port (31.9% occupancy, 63,117 sqm — the largest single vacancy drag by NLA), DPL Koriyama (74.6%, 34,157 sqm), and DPL Kawasaki Yako (93,159 sqm leasehold, where the manager is in advanced discussions with a potential new tenant). WALE 6.3 years by GRI (vs 6.6 years at 31 December 2025 — the step-down reflects time passage and the lease expiry profile, not fundamental deterioration). Excluding DPL Sendai Port, the remaining 18 properties were at approximately 96% occupancy as at 31 March 2026.

Rent Reversion — The Constructive Signal

Three leases expire in 2Q FY2026. Of those, one has already been renewed and a second is expected to be renewed — both at higher rents. Discussions with a potential tenant are ongoing for the space to be vacated. This is the most concrete positive signal in the 1Q update: after nine consecutive renewals at positive reversion (+11.1% weighted average) across FY2025, the 2Q FY2026 renewal pipeline is tracking the same direction. The Japan logistics market structure supports continued positive reversion — e-commerce and 3PL demand remains firm, and new supply is expected to moderate as construction cost pressures curb future development. CEO Jun Yamamura flagged advanced discussions for the DPL Kawasaki Yako vacant space as progressing well.

Capital Management

Aggregate leverage of 40.6% represents a marginal 40bps increase from 40.2% at 31 December 2025, attributable to the cash distribution paid in March 2026 — not new borrowings. ICR of 5.1x (vs 5.5x at FY2025 close; the step-down reflects higher interest expense from FY2025 refinancings but remains well above the 1.5x MAS floor). 99.3% of borrowings at fixed rates and 100% denominated in JPY, providing a natural hedge against the JPY-denominated asset base. Total undrawn facilities of S$100 million as at early 2026. Debt maturity profile: S$16.4M (2026), S$98.4M (2027), S$57.5M (2028), S$102.5M (2029), S$82.0M (2030).

Three Signals Beyond The Headline

1. THE VACANCY STORY IS THREE PROPERTIES, NOT A PORTFOLIO PROBLEM. 87.8% sounds soft for a logistics REIT. But 96% occupancy across 18 of 19 properties is a materially different picture. DPL Sendai Port is the structural overhang — at 63,117 sqm and 31.9% occupancy, it is a single-asset drag that mechanically suppresses the portfolio rate. Resolution of Sendai Port alone would push portfolio occupancy north of 92% in one step. The manager has been working this vacancy since FY2025; DPL Kawasaki Yako discussions are described as progressing well.

2. POSITIVE REVERSION IS THE LEADING INDICATOR. NPI is a lagging number — it reflects today's vacancy. Rent reversion is a leading number — it tells you the direction of rents on space that is leasing. Nine for nine at +11.1% weighted average in FY2025, and now 2Q FY2026 renewals tracking positive again. The Japan logistics market structure (moderating new supply, sticky 3PL demand, labour-shortage-driven demand for modern specification facilities with worker amenities) supports continued positive reversion even into a higher-rate environment.

3. THE FX DRAG IS REAL BUT THE BALANCE SHEET IS INSULATED. SGD NPI -12.4% against JPY NPI -4.9% — the gap is pure FX translation. But 100% of borrowings are also JPY-denominated, providing a natural asset-liability hedge. Unitholders feel FX on the income line; NAV/unit is better protected because both sides move together. 99.3% fixed-rate borrowings means near-term earnings are insulated from BOJ rate path. Eight leases expire in FY2026 (12.2% of GRI), with three in 1H FY2026 largely resolved. The 2H expiries (approximately 9.0% of GRI) are the next leasing test.