SFS Real Estate Investment Trust (SFS REIT) delivered a strong first-half performance in 2026 as higher returns from fixed-income investments, improved rental income, and gains from the sale of a property boosted earnings.
The Nigerian Exchange-listed REIT reported total income of N272.42 million for the six months ended June 30, 2026, representing a 28.9 percent increase from N211.23 million recorded in the corresponding period of 2025.
The growth was driven by the trust’s increasingly diversified revenue base, with investment income overtaking rental income as its largest source of earnings.
Fixed-interest income rose 19.8 percent to N127.22 million from N106.16 million a year earlier, accounting for nearly 47 percent of total income.
Rental income also remained resilient, increasing 16.8 percent to N122.70 million from N105.07 million, while the disposal of an investment property generated an additional N22.5 million in profit, compared with no disposal gains in the first half of last year.
The stronger revenue performance underscores a gradual shift in the REIT’s earnings mix, reducing its dependence on rental collections by generating more income from fixed-income securities and strategic asset recycling.
Despite the robust revenue growth, rising operating costs continued to weigh on profitability.
Administrative and other operating expenses climbed 60.2 percent to N71.66 million, compared with N44.74 million in the same period last year.
Fund management fees increased to N32.01 million from N20.52 million, reflecting the larger asset base under management. Regulatory expenses also rose sharply, with SEC fees climbing to N6.35 million from N2.71 million, while the trust incurred N4.94 million in Nigerian Exchange listing fees that were absent in the previous year.
Fund-rating expenses doubled to N2.5 million, while audit fees rose to N1.27 million from N100,000, highlighting the increasing cost of regulatory compliance and governance.
Even so, the REIT maintained profitability, reporting net income of N166.49 million, while basic earnings per unit improved to 10.04 kobo from 8.32 kobo in the first half of 2025, providing stronger returns to unitholders.
Portfolio remains fully occupied
The trust continued to demonstrate resilience in its core real estate operations.
According to its latest key performance metrics, SFS REIT owns eight residential investment properties located across Lagos’ high-end Lekki corridor, comprising 48 residential units spread across Victory Park Estate, Milverton Court Estate, Sapphire Gardens Estate, Bourdillon Court Estate, Cromwell Estate, Maben Estate, Victoria Crest Estate and Northern Foreshore Estate.
Seven of the eight properties maintained 100 percent occupancy, underlining sustained demand for premium residential apartments despite Nigeria’s challenging macroeconomic environment.
The only exception is the Northern Foreshore Estate, which is still under construction and therefore recorded zero occupancy during the reporting period. Overall rent delinquency remained low at 1.7 percent, suggesting strong tenant quality and efficient rent collection.
Property yields across the portfolio ranged from 3.40 percent to 5.88 percent.
Sapphire Gardens generated the highest yield at 5.88 percent, followed by Victoria Crest Estate at 5.65 percent, Maben Estate at 5.15 percent and Victory Park Estate at 4.49 percent.
Milverton Court, Bourdillion Court, and Cromwell Estate recorded yields of 3.53 percent, 3.51 percent, and 3.40 percent, respectively.
The properties vary in age from newly developed assets to buildings that have been operational for up to 16 years, providing a balanced mix of mature income-producing assets and newer developments.
Investment strategy shifts toward financial assets
One of the most significant developments during the period was the REIT’s aggressive expansion into financial investments.
Investment in securities surged to N1.23 billion as of June 30, 2026, from N371.53 million at the end of December 2025—an increase of more than 231 percent.
The investment portfolio consists of N1.01 billion in securities and N219.38 million in real estate-related investments, reinforcing management’s strategy of complementing rental income with higher-yielding financial assets.
Meanwhile, investment property declined slightly to N5.38 billion from N5.51 billion at year-end following the disposal of one property in Bourdillon Court.
The trust noted that the remaining properties continue to be measured using the fair-value model based on an independent valuation conducted in December 2025. Even after the disposal, investment properties still accounted for roughly 80 percent of total assets, preserving the REIT’s focus on real estate-backed income generation.
Stronger operating cash flow, weaker liquidity
The REIT generated substantially stronger cash from operations during the first half.
Net cash generated from operating activities increased more than tenfold to N242.26 million, compared with N21.66 million in the corresponding period of 2025.
The improvement reflected stronger rental collections, higher investment income and a significant reduction in receivables, which helped offset increases in operating expenses.
However, liquidity weakened after management deployed capital into investments and shareholder distributions.
The REIT invested N718.17 million in securities during the period while paying N566 million in distributions to unitholders.
As a result, cash and cash equivalents declined sharply to N109.54 million, from N930.98 million at the end of December 2025, representing an 88 percent reduction.
Balance sheet reflects capital distribution
Total assets stood at N6.72 billion, down from N7.08 billion six months earlier, while net assets declined to N6.10 billion from N6.46 billion.
Revenue reserves fell to N613.91 million from N979.15 million, largely reflecting the N566 million distribution made to investors during the reporting period.
Unclaimed distributions also increased to N478.61 million from N418.14 million, while deferred income declined to N102.51 million from N150.10 million.
The trust’s latest performance metrics show that its net asset value stood at N6.10 billion at the end of June, supported by a portfolio of eight residential assets with high occupancy and stable rental demand.
The fund is currently the 117th most valuable stock on the NGX with a market capitalisation of N8.38 billion. SFSREIT closed Monday’s trading day at N418.75 per share.
