Ascendas REIT (SGX:A17U), Singapore’s first and largest-listed business space and industrial REIT with properties in Singapore, Australia, United States, as well as in United Kingdom/Europe, released its latest results for the first half of the financial year 2021 ended 30 June 2021 shortly after the market closed this evening (02 August 2021.)

Just like for all the companies I have in my long-term investment portfolio (you can check out a list of all the companies I have invested in here), I have studied the blue-chip REIT’s latest results release with interest and in this post, you will find my summary of its latest set of financial results, portfolio occupancy and debt profile, and its distribution payout to unitholders, together with my personal thoughts about the latest set of statistics:

Financial Results (1H FY2020 vs. 1H FY2021)

As the REIT did not post any financial figures for the first quarter of the financial year (as it has switched to reporting its financial results on a half-yearly basis), in this section, you’ll only find its results for the first half of the financial year 2021 compared against the same time period last year (i.e. 1H FY2020):

1H FY20201H FY2021% Variance
Gross Revenue
(S$’mil)		$521.2m$586.0m+12.4%
Property Operating
Expenses (S$’mil)		$133.2m$140.4m+5.4%
Net Property
Income (S$’mil)		$388.0m$445.6m+14.8%
Distributable
Income to
Unitholders (S$’mil)		$263.2m$311.0m+18.2%

In summary, the latest set of results is another improved one for the REIT – the 12.4% and 14.8% increase in its gross revenue and net property income respectively can be attributed to contributions from the 11 data centres across Europe acquired in March 2021, the 2 office properties in San Francisco acquired in November 2020, as well as 2 suburban offices in Australia acquired in January 2021 and September 2020, partially offset by the absence of S$10.3m of Covid-related grants received from the Singapore government in the same time period last year.

Along with the operating expenses incurred by the newly acquired properties, its property operating expenses went up by 5.4% to S$140.4m (compared to S$133.2m in 1H FY2020.)

Finally, the 18.2% improvement in its distributable income to unitholders is in-line with the increase in the REIT’s net property income. However, this is offset by higher net finance costs due to higher average debt balance, lower dividend income received from the associate company which owns Galaxis in 1H FY2021, along with an increase non property operating expenses and tax expenses attributable to the new acquisitions.

Portfolio Occupancy Profile (Q1 FY2021 vs. Q2 FY2021)

Next, let us take a look at the REIT’s portfolio occupancy profile, where I will be putting the statistics recorded for the current quarter under review (i.e. Q2 FY2021 ended 30 June 2021) against that recorded in the previous quarter 3 months ago (i.e. Q1 FY2021 ended 31 March 2021) to find out whether it has continue to remain resilient or deteriorated (as a unitholder, I would very much prefer it to be the former):

Q1 FY2021Q2 FY2021
Portfolio Occupancy
(%)		90.6%91.3%
Rental Reversion
(%)		+3.0%+8.9%

My Observations: It’s definitely encouraging to note that both its portfolio occupancy, as well as rental reversion have strengthened – the improvements in its portfolio occupancy rate can be attributed to improvements in occupancy rates in its Singapore properties (where it went up from 86.9% in Q1 FY2021 to 87.9% in Q2 FY2021), in its Australia properties (where the overall portfolio occupancy increased from 94.9% in Q1 FY2021 to 95.8% in Q2 FY2021), as well as in its United States properties (where its portfolio occupancy edged up slightly from 92.5% in Q1 FY2021 to 92.8% in Q2 FY2021.)

The very impressive +8.9% of rental reversion for the current quarter under review is largely attributed to a big jump from the renewal rates for multi-tenant buildings in the United States (from +6.2% in Q1 FY2021 to +26.3% in Q2 FY2021.) That said, I understand from the REIT’s presentation slides that rental reversion for FY2021 is expected to be in the positive low single-digit range in view of the current market uncertainties.

Last but not least, in the second half of 2021, only 5.8% of the leases will be due for renewal – which in my opinion is minimal.

Debt Profile (Q1 FY2021 vs. Q2 FY2021)

Similar to the previous section, where I compared the REIT’s portfolio occupancy profile for the current quarter under review against that recorded in the previous quarter 3 months ago, I too will be comparing its debt profile the same way in the table below:

Q1 FY2021Q2 FY2021
Aggregate Leverage
(%)		38.0%37.6%
Interest Coverage
Ratio (times)		4.6x4.6x
Average Term to
Debt Maturity (years)		3.3 years3.7 years
Average Cost of
Debt (%)		2.2%2.4%

My Observations: Apart from a slight increase in its average cost of debt, I’m happy that on the whole, its debt profile have strengthened (in that its aggregate leverage have come down slightly – and at its current level, there still remains a debt headroom of approximately S$4.2b before it reaches the regulatory limit of 50.0%, along with improvements in its average term to debt maturity.)

Distribution Per Unit to Unitholders (1H FY2020 vs. 1H FY2021)

The following is the REIT’s distribution per unit to its unitholders for the first half of the current financial year under review against that declared in the same time period last year:

1H FY20201H FY2021% Variance
Distribution Per
Unit (S$’cents/unit)		7.27 cents7.66 cents+5.4%

Of the 7.66 cents/unit declared, a payout of 5.63 cents/unit (for the period between 01 January and 13 May 2021) have already been forward distributed to unitholders on 09 June 2021 before the preferential placement exercise (you can read the document in full here). The remaining amount of 2.03 cents/unit (for the period between 14 May and 30 June 2021) will be paid out on 03 September 2021, with the ex-distribution date on 10 August 2021, and record date on 11 August 2021.

Closing Thoughts

Personally, as a unitholder, I am happy with the blue-chip REIT’s latest set of results.

If I have to note one thing I particularly like about its latest results release, it will be the positive rental reversion recorded for the current period under review – what makes it all the more impressive is that it is achieved amidst all the market uncertainties.

Finally, in terms of its debt profile, there still remains ample of debt headroom for the REIT to make further yield-accretive acquisitions as and when an opportunity to do so becomes available.

With that, I have come to the end of my review of Ascendas REIT’s latest 1H FY2021 results. As always, a disclaimer that everything you have just read above is purely for educational purposes only and that they do not represent any buy or sell calls for the REIT’s units. Please do your own due diligence before you make any investment decisions.

Related Documents

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

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