Ascendas REIT (SGX:A17U), Singapore’s first and largest-listed business space and industrial REIT, and also a constituent of Singapore’s Straits Times Index (STI), released its business update for the first quarter of the financial year 2021 ended 31 March 2021 after trading hours last Friday (23 April 2021.)

As the REIT have switched to half-yearly reporting since last year, no financial figures were reported for the current quarter under review. Also, along with the REIT switching to reporting its financial figures on a half-yearly basis, distributions are also being paid out on a half-yearly basis as well.

Therefore in this post, you will only find a comparison of the blue-chip REIT’s debt and portfolio occupancy profile for the current quarter under review against the previous quarter three months ago (i.e. Q4 FY2020 ended 31 December 2020) to find out if they have strengthened, continued to remain stable, or have paled in comparison.

Let’s get started…

Debt Profile (Q4 FY2020 vs. Q1 FY2021)

	Q4 FY2020	Q1 FY2021
Aggregate Leverage (%)	32.8%	38.0%
Interest Coverage Ratio (times)	4.3x	4.6x
Average Term to Debt Maturity (years)	3.7 years	3.3 years
Average Cost of Debt (%)	2.7%	2.2%

My Observations: While it is good to note that the REIT’s average cost of debt have come down by quite a fair bit (from 2.7% in Q4 FY2020 to 2.2% in Q1 FY2021 – an improvement by 0.5 percentage points, or pp for short), and its interest coverage ratio have improved to 4.6x, but its aggregate leverage have jumped by 5.2pp to 38.0% at the end of Q1 FY2021 after the acquisition of 11 data centres across 5 key European cities, as well as the acquisition of a suburban office at 1-5 Thomas Holt Drive in Sydney, Australia – that said, I also understand from the REIT’s presentation slides that there still remains a debt headroom of approximately S$3.8b before it reaches the MAS’ regulatory limit of 50.0%.

Portfolio Occupancy Profile (Q4 FY2020 vs. Q1 FY2021)

	Q4 FY2020	Q1 FY2021
Portfolio Occupancy (%)	91.7%	90.6%
Rental Reversion (%)	+2.5%	+3.0%

My Observations: Again, there are positives and negatives to note for the REIT’s portfolio occupancy profile for the current quarter under review (i.e. Q1 FY2021) against the previous quarter 3 months ago (i.e. Q4 FY2020.)

The positive is that the REIT has continued to record not just a positive rental reversion, but also a better one compared to the previous quarter.

On the other hand, its portfolio occupancy rate saw a 1.1pp decline to 90.6%, due to a decline in occupancy rate for all its geographies except for in UK and Europe (which gone up from 97.5% in Q4 FY2020 to 98.6% in Q1 FY2021):

• The decline in its Singapore properties (from 88.4% in Q4 FY2020 to 86.9% in Q1 FY2021) was due to non-renewals at TÜV SÜD PSB Building as it was planned for re-development, and at 138 Depot Road.
• The decline in its Australia properties (from 97.4% in Q4 FY2020 to 94.9% in Q1 FY2021) was due to non-renewals at 1 Distribution Place in Sydney, and at 62 Stradbroke Street in Brisbane.

In Conclusion

Personally, I felt that the REIT’s latest business update was a mixed bag – while its good to note that the REIT has continued to report not just a positive, but also a bettering rental reversion. However, I also note that its aggregate leverage compared to the previous quarter have increased by quite a bit – something I will continue to monitor in the quarters ahead.

Related Documents

• Presentation Slides

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

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