SFS REIT profit rises 21% as heavy outflows drain cash
SFS REIT grew first-half net income by 21% on stronger interest yields, but aggressive securities purchases and heavy dividend payouts created a severe liquidity gap.
SFS Real Estate Investment Trust posted a 20.58% increase in first-half 2026 net income to N200.8 million, driven by a strategic shift toward financial instruments. Total income rose 29% to N272.4 million. Rental income grew 16.8% to N122.7 million, but fixed interest income of N127.2 million became the primary revenue driver.
The earnings growth, however, masks a dramatic cash drain that presents immediate risks. The trust reported a net cash outflow of N821.4 million over the six months, driven by N566 million in distributions and N718.2 million ploughed into investment securities. Consequently, cash and equivalents collapsed by 88% to N109.5 million.
This depletion of reserves has pushed the trust into a precarious short-term liquidity position. Current assets now stand at just N111.2 million against current liabilities of N619.4 million. Unclaimed dividends, the largest single liability, rose 14.5% to N478.6 million, with unclaimed distributions for the half jumping to N60.471 million.
The balance sheet reflects a deliberate pivot away from physical real estate. While investment properties remain dominant at N5.51 billion, holdings in investment securities surged 231% to N1.23 billion. Investment properties account for roughly 82% of total assets, though the rapid acquisition of financial instruments signals a changing risk profile.
Profit growth was achieved despite a sharp escalation in operating expenses that weighed on margins. Manager’s fees, the single largest cost, jumped 56% to N32 million, accounting for roughly 45% of total operating expenses. The trust also absorbed a new N4.94 million NGX listing fee, while SEC fees climbed to N6.35 million.
The Lagos-focused residential portfolio remains heavily concentrated. Milverton Lekki is valued at N2.30 billion, followed by Victory Park Estate at N1.08 billion. Bourdillon Court saw its valuation drop to N687.5 million following a property sale that generated a N22.5 million profit.
Basic earnings per unit improved to N10.04 from N8.32. Yet, revenue reserves fell to N613.9 million from N979.2 million as distributions outpaced retained earnings, leaving the fund with fewer buffers to manage its newly acquired securities portfolio.
