Another blue-chip REIT in my long-term investment portfolio (you can check out a list of all the companies I’ve invested here), Ascendas REIT (SGX:A17U), released its business updates for the third quarter of the financial year 2020 (ended 30 September) after market hours yesterday (26 October 2020.)

As the REIT have switched to half-yearly reporting for the first and third quarter, there are no updates on their financial results. Likewise, there are also no dividends declared for the two quarters as the REIT have switched to paying out unitholders on a semi-annual basis.

In this post, let us take a look at its debt and portfolio occupancy profile reported for the third quarter, compared against the previous quarter (ie. Q2 FY2020 ended 30 June 2020), along with my thoughts:

Debt Profile (Q2 FY2020 vs. Q3 FY2020)

Q2 FY2020Q3 FY2020
Gearing Ratio
(%)
36.1%34.9%
Interest Coverage
Ratio (times)
4.2x4.3x
Average Term to
Debt Maturity (years)
3.6 years3.7 years
Average Cost of
Debt (%)
2.9%2.8%

My Thoughts: Personally, I am happy to note that the REIT’s debt profile have improved compared to the previous quarter – its gearing ratio fell by 1.2 percentage points (pp) to 34.9% (and a debt headroom of about S$4.2b away from the regulatory limit of 50.0%), its interest coverage ratio and average term to debt maturity edging up slightly, and its average cost of debt inching down slightly as well.

I also note that the REIT have also hedged approximately 76% of their Australian dollar borrowings, as well as 100% of their British Pounds and United States Dollar borrowings, to minimise the effects of adverse exchange rate fluctuations.

Portfolio Occupancy Profile (Q2 FY2020 vs. Q3 FY2020)

Q2 FY2020Q3 FY2020
Portfolio Occupancy
(%)
91.5%91.9%
Rental Reversion
(%)
+5.4% -2.3%
Portfolio Weighted
Average Lease
Expiry (%)
3.9 years3.9 years

My Thoughts: Its portfolio occupancy profile is also a pretty resilient one as well – where its overall portfolio occupancy rate inched up by 0.4pp to 91.9% (attributed by improvements in occupancy rates in its Singapore portfolio from 87.9% in Q2 to 88.1% in Q3, its United Kingdom portfolio from 97.5% in Q2 to 97.7% in Q3, and its United States portfolio from 92.0% in Q2 to 92.1% in Q3, offset by a decline in its Australian portfolio from 98.4% in Q2 to 95.4% in Q3.)

The only negative was its rental reversions, which was at -2.3% as at 30 September 2020 – due to a negative rental reversion of -2.8% in the renewal of leases in its Singapore properties, offset by a positive rental reversion of +11.5% in the renewal of leases in its United Kingdom properties.

In Conclusion

Personally, as a unitholder of the REIT, I feel that its debt profile as at 30 September 2020 was a conservative one, with plenty of debt headroom for further yield-accretive acquisitions. At the same time, its portfolio occupancy profile continued to remain resilient 3 months on.

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Disclaimer: At the time of writing, I am a unitholder of Ascendas REIT.

 

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