Ascendas REIT (SGX:A17U) conducted its virtual AGM earlier this afternoon, which I attended as a unitholder to receive an update on the REIT’s businesses from the management.
For the benefit of those who did not attend the meeting, here are some of the key pointers to take note of in Mr William Tay’s (who is the Executive Non-Independent Director and Chief Executive Officer of the REIT) presentation – you will find some of the key figures reported in FY2019, investment activities in 1Q 2020, updates on ongoing development projects, debt and portfolio occupancy profile, along with the level of support provided to the REIT’s tenants during the Covid-19 pandemic:
Key Highlights of FY2019
For the REIT’s financial year 2019 (period between 01 April 2019 to 31 December 2019) under review:
- Distributable income grew by 5.2% year-on-year (y-o-y) to S$375.4m mainly attributed to newly acquired properties in the UK, US, and Singapore
- Distribution per unit saw a 3.3% y-o-y decline to 11.490 cents as a result of the additional units issued (up by 9%) from rights issuance (conducted in November 2019), along with a mismatch in timing between the contributions from newly acquired properties
- Total assets grew by 25.9% y-o-y to S$13.9b, mainly attributable by the REIT’s acquisition of properties across US, Singapore, and Australia (worth a total of S$1.77b, its highest on record since its listing 17 years ago):
- Australia: At 254 Wellington Road in Melbourne, currently under construction (expected to be completed in 3Q FY2020), with Nissan leasing 65.2% of the space as its HQ and training centre
- US: 28 business park properties across the US tech cities of San Diego, Raleigh, and Portland, with 65% of tenants in the growing information, medical, and financial tech sectors, all of which will contribute positively to the REIT in the long-term
- Singapore: 2 business parks (in Nucleos, and FM Global Centre), which will solidify the REIT’s leadership in the Singapore business park segment
- Moving forward in the year 2020, Mr Tan shared that while Ascendas REIT will continue to be a Singapore-centric REIT (with 60-70% of their properties in Singapore), they are also open to further acquisitions in other geographical locations they already have a presence in (i.e. US, UK, and Australia)
Ascendas REIT’s Investment Activities in 1Q FY2020
The following are some of the updates provided by Mr Tan about the REIT’s investment activities in 1Q FY2020:
- Acquisition of a 25% stake in Galaxis (in Singapore) in March 2020 for S$102.9m. The property is leased by reputable tenants such as Canon, Oracle, and SEA Group (formerly Garena), and the acquisition is accretive to DPU
- Divestment of 3 properties in Singapore (Wisma Gulab, 202 Kallang Bahru, and 25 Changi South Street 1) which generated total sales proceeds of S$125.3m
Moving forward, Mr Tan said the REIT will continue to divest properties and optimise return for its unitholders.
Updates on On-Going Build-to-Suit and Redevelopment (all in Singapore)
- Grab’s Singapore Headquarter is a build-to-suit development project which is estimated to complete in 1Q FY2021
- Redevelopment of UBIX (former 25 & 27 Ubi Road 4), where the project involves turning 2 existing light industrial buildings into a single high-specification building, with a higher floor plate and higher ceiling height. The project is estimated to be completed in 2Q FY2021
- Redevelopment of the former iQuest@IBP to maximise plot ratio and double gross floor area. It is estimated to be completed by 3Q FY2022
Ascendas REIT’s Debt Profile
As at 31 March 2020, the REIT’s debt profile is as follows (with CEO Mr Tan’s comments in brackets):
- Aggregate leverage: 36.2% (there still remains a debt headroom of about $3.8b before it reaches the 50.0% aggregate leverage limit)
- Weighted tenure of debt: 3.8 years
- Average all-in cost of debt: 2.9%
- Moody’s rating: A3 (which allows for financial flexibility and strong access to capital)
Finally, in terms of debts which may be due in 1H FY2020, Mr Tan updated that while there are no debts due for refinancing, there are S$660m in bond, perpetual security, and loans due for refinancing in 2H FY2020. He added that the refinancing will not impact the Moody’s rating.
Ascendas REIT’s Portfolio Occupancy Profile
- Ascendas REIT’s overall portfolio occupancy has remained healthy – at 90.9% as at 31 December 2019, and 91.9% as at 31 March 2020
- Its portfolio weighted average lease expiry as at 31 December 2019 is stable at 3.9 years
- In terms of rental reversions, Mr Tan shared that while it has remained healthy in the first quarter of 2020, but it have slowed down since (due to Covid-19 pandemic.) He expects rental reversion to be flat for the current financial year
- The REIT has a total customer base of around 1,490 tenants, operating in more than 20 industries. Also, its top 10 customers (as at 31 December 2019) account for just 17.9% of the REIT’s monthly portfolio gross revenue and as such, there is a low tenant concentration risk
Provision of Assistance to Tenants during the Covid-19 Pandemic
As a result of the Covid-19 pandemic worldwide, Mr Tan shared that the governments in the countries which the REIT has properties in have implemented a varying degrees of lockdowns, along with support measures.
The following are some of the support provided by the REIT to its tenants in the different countries to highlight:
- Singapore: SMEs account for less than 20% of the REIT’s gross rental income, and for qualifying SMEs, rent waiver and deferment were provided
- Australia: The REIT have suspended rent collection from their F&B tenants (which accounted for less than 1% of its Australia portfolio by rental income) from April until they reopen, along with restructuring the lease of one leisure/hospitality tenant, providing rental rebate
- United Kingdom: No rental rebates given to-date
- United States: While the country has the highest number of Covid-19 cases, a majority of its tenants were not affected as the industries they are in are in IT and healthcare, whose operations are allowed to continue
Impact on MAS’ New Policies on Ascendas REIT
- The higher aggregate leverage limit to 50% (from 45%) had no impact to Ascendas REIT as Mr Tan shared that the REIT have been trying to keep its gearing at under 40.0%
- In terms of the extension given to the REITs to distribute at least 90% of the REIT’s taxable income for the financial year ending in 2020 from 3 months (after the end of the financial year) to 31 December 2021 to qualify for tax transparency, Mr Tan updated that while Ascendas REIT has been distributing 100% of the taxable income available for distribution, its policy is to distribute at least 90% of the taxable income
Personally, I felt the virtual AGM provided me with the necessary updates I need to know about the REIT, and I remain confident of its growth in the year ahead.
- Questions (by Unitholders), and Answers (by the Management) Relating to the AGM
- AGM Presentation Slides
Disclaimer: At the time of writing, I am a unitholder of Ascendas REIT.
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