SFS REIT posts 29% income growth to N272.4 million in H1 2026 despite rising costs and cash crunch

SFS Real Estate Investment Trust (SFS REIT) grew its total income by approximately 29% to N272.4 million in the first half of 2026, up from N211.2 million in the same period of 2025. This is according to the Trust’s H1 2026 interim financial statement filed with the Nigerian Exchange (NGX), which shows the fund benefited from stronger rental and investment income while grappling with rising costs and reduced cash reserves.

Rental and investment income drive top-line growth

Rental income rose 16.8% to N122.7 million from N105.1 million a year earlier, reflecting stronger earnings from SFS REIT’s property portfolio. Fixed interest income climbed 19.8% to N127.2 million from N106.2 million, overtaking rental income as the Trust’s largest revenue source during the period. The Trust also booked a N22.5 million profit from the disposal of an investment property, providing an additional lift to earnings.

The stronger top line lifted net income by 20.58% to N200.8 million, up from N166.5 million in the corresponding period of 2025, despite a surge in operating expenses. Basic earnings per unit improved to N10.04 from N8.32 in the prior-year period.

Operating expenses jump 60% on higher manager fees and regulatory costs

Administrative and other expenses jumped 60.4% to N71.7 million from N44.7 million. Manager’s fees rose about 56% to N32 million, accounting for roughly 45% of total operating expenses and remaining the single largest cost item. SEC fees climbed to N6.35 million from N2.71 million, while the Trust incurred a new NGX listing fee of N4.94 million. Annual report publication and dividend-related expenses came in at N8.74 million, other administrative expenses stood at N10.98 million, and fund rating expenses more than doubled to N2.5 million.

Cash reserves fall sharply as distribution and investment outflows mount

Total assets declined 5.2% to N6.72 billion from N7.08 billion at the end of 2025. Investment properties remained the dominant asset class at N5.51 billion, or about 82% of total assets. Investment securities surged 231% to N1.23 billion from N371.5 million, pointing to a growing shift toward financial instruments.

Cash and cash equivalents fell sharply by 88% to N109.5 million from N931 million, dragging current assets down to N111.2 million against current liabilities of N619.4 million. That gap signals near-term liquidity pressure. Net assets attributable to unitholders slipped 5.7% to N6.10 billion from N6.46 billion. Unclaimed dividends rose 14.5% to N478.6 million, the largest single liability on the balance sheet.

For the six months ended June 30, 2026, unclaimed dividend distribution jumped to N60.471 million, up from N5 million in the corresponding period of 2025. Revenue reserves fell to N613.9 million from N979.2 million following distributions paid during the period. Distribution payments to unitholders increased to N566 million from N430 million, while the Trust ploughed N718.2 million into securities, contributing to an overall net cash outflow of N821.4 million for the half year.

Portfolio concentrated in Lagos residential assets

SFS REIT’s portfolio remains concentrated in Lagos residential assets, including Milverton Lekki, Victory Park Estate, Sapphire Gardens Awoyaya, Bourdillon Court, Victoria Crest Estate, Northern Foreshore Estate, Cromwell Estate and Maben Estate. Milverton Lekki remains its largest asset, valued at N2.30 billion, followed by Victory Park Estate at N1.08 billion. Bourdillon Court’s valuation declined to N687.5 million from N825 million after the sale of one of its properties.

In its audited results for the year ended December 2025, SFS REIT reported total comprehensive profit of N4.1 billion, a significant 761.8% increase compared to the N477.09 million recorded in the prior year.

For Nigerian investors and unitholders, the sharp drop in cash reserves and the rise in unclaimed dividends suggest the Trust is under pressure to manage liquidity even as it records strong income growth. The shift toward investment securities may signal a strategic pivot, but the cash crunch raises questions about near-term distribution capacity.