Shortly after trading hours in the evening (08 February 2022), another REIT in my long-term investment portfolio (for those of you who are curious on the list of Singapore-listed companies I have investments in, you can check it out here) – Ascendas REIT (SGX:A17U) released its financial results for the second half, as well as for the full-year ended 31 December 2021 (i.e. FY2021.)
For those of you who are not familiar with the REIT, it is Singapore’s first and largest business space and industrial REIT, with its portfolio comprising 220 properties (which includes business spaces, logistics and distribution centres, industrial properties and data centres) in Singapore, Australia, the United States, and the United Kingdom/Europe (at the time of writing.) The REIT is also a constituent of Singapore’s benchmark Straits Times Index (STI.)
In the sections ahead, you’ll find my review of the blue-chip REIT’s latest financial results, portfolio occupancy and debt profile, along with its distribution payout to unitholders.
Let’s begin…
Financial Results (2H FY2020 vs. 2H FY2021, and FY2020 vs. FY2021)
In this section, I will first be looking at the REIT’s results reported for the second half of the year, followed by its results reported for the full-year:
2H FY2020 vs. 2H FY2021:
| 2H FY2020 | 2H FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $528.2m | $640.5m | +21.3% |
| Property Operating Expenses (S$’mil) | $140.0m | $165.3m | +18.1% |
| Net Property Income (S$’mil) | $388.2m | $475.2m | +22.4% |
| Distributable Income to Unitholders (S$’mil) | $275.2m | $319.0m | +15.9% |
Compared to the second half of FY2020, Ascendas REIT’s financial results for the second half of FY2021 is an improved one – where its top- and bottom-line improvements (mainly attributable to contribution from the completion of 254 Wellington Road, Australia in September 2020, acquisition of 2 properties in San Francisco, USA, in November 2020, acquisition of 1-5 Thomas Holt Drive, Australia in January 2021, and acquisition of 11 data centres in Europe in March 2021, acquisition of the remaining 75.0% interest in AF5PL that holds Galaxis, Singapore in June 2021, completion of Grab Headquarters, Singapore, in July 2021, and acquisition of 11 logistics properties in Kansas City, USA, in November 2021, coupled with property operating expense increasing by a smaller percentage compared to its gross revenue.
FY2020 vs. FY2021:
| FY2020 | FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $1,049.5m | $1,226.5m | +16.9% |
| Property Operating Expenses (S$’mil) | $273.2m | $305.8m | +11.9% |
| Net Property Income (S$’mil) | $776.2m | $920.8m | +18.6% |
| Distributable Income to Unitholders (S$’mil) | $538.4m | $630.0m | +17.0% |
Just like its results for the second half of the financial year, Ascendas REIT’s full-year results also saw pretty decent improvements – the growth in its gross revenue and net property income can be attributed to contributions by the 2 office properties in San Francisco, United States (acquired in November 2020), one suburban office property in Sydney, Australia (acquired in January 2021), 11 data centre properties across 4 countries in Europe (acquired in March 2021), remaining 75.0% interest in the associate that hold a business and science park property in Singapore (acquired in June 2021), as well as 11 logistics properties in Kansas City, US (acquired in November 2021.)
In-line with improvements seen in its gross revenue and net property income, its distributable income to unitholders went up by a similar percentage (by 17.0% compared to the previous financial year 2020.)
Finally, the 11.9% year-on-year (y-o-y) increase in its property operating expenses was mainly due to additional operating expenses from the acquisitions completed in the financial year.
Portfolio Occupancy Profile (Q3 FY2021 vs. Q4 FY2021)
Let us now take a look at the REIT’s portfolio occupancy profile – where I have taken the statistics reported for the quarter ended 31 December 2021 (i.e. Q4 FY2021) and compare against that reported in the previous quarter 3 months ago (i.e. Q3 FY2021 ended 30 September 2021) to find out if it continues to remain resilient:
| Q3 FY2021 | Q4 FY2021 | |
| Portfolio Occupancy (%) | 91.7% | 93.2% |
| Rental Reversion (%) | +3.7% | +2.9% |
| Portfolio WALE (by Gross Revenue – years) | 3.8 years | 3.8 years |
My Observations: It’s encouraging to note that the REIT’s overall portfolio occupancy have improved compared to the previous quarter (apart from the properties in United Kingdom/Europe – which saw its portfolio occupancy fall slightly from 98.2% in Q3 FY2021 to 96.7% in Q4 FY2021 [largely due to lease expiry at Transpennine 200, Pilsworth Heywood in November 2021, but Heads of Terms for a 10-year lease has been signed with prospective tenants from Q3 FY2022], the portfolio occupancies of its properties in Singapore, Australia, and United States all saw improvements.)
In terms of rental reversion, compared to the previous quarter, it has dipped slightly (due to rental reversions for its Singapore properties dipping from +3.6% in Q3 FY2021 to +2.3% in Q4 FY2021.) That said, however, on a full-year basis, the REIT’s portfolio rental reversion have improved by 7 percentage points from +3.8% in FY2020 to +4.5% in FY2021.
Lease expiry-wise, it is well-spread out over the next couple of years, with 18.7% of the leases expiring in FY2022, 20.6% of the leases expiring in FY2023, 16.0% of the leases expiring in FY2024, 12.9% of the leases expiring in FY2025, and the remaining 31.8% of the leases expiring in FY2026 and beyond.
Debt Profile (Q3 FY2021 vs. Q4 FY2021)
Similar to how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will also be reviewing its debt profile by taking the statistics reported for the current quarter under review (i.e. Q4 FY2021 ended 31 December 2021) and compare against that reported in the previous quarter 3 months ago (i.e. Q3 FY2021 ended 30 September 2021) to find out if it has continued to remain healthy:
| Q3 FY2021 | Q4 FY2021 | |
| Aggregate Leverage (%) | 37.4% | 35.9% |
| Interest Coverage Ratio (times) | 4.9x | 5.7x |
| Average Term to Debt Maturity (years) | 3.5 years | 3.5 years |
| Average Cost of Debt (%) | 2.4% | 2.2% |
My Observations: The REIT’s debt profile, when compared against the previous quarter, have further strengthened – particularly, its aggregate leverage, at 35.9%, has ample of debt headroom before the regulatory limit of 50.0% is reached (do note that the regulatory limit for the REIT has been upped to 50.0% with effect from FY2022 as it has managed to maintain its interest coverage ratio at above 2.5x.)
Distribution Payout to Unitholders
Along with the REIT switching to reporting its full financial results on a half-yearly basis since FY2020, it has also switched to paying a distribution to its unitholders in the same time frequency.
With that, let us take a look at its distribution payout for the current period under review (i.e. 2H FY2021) compared against the same time period last year (i.e. 2H FY2020):
| 2H FY2020 | 2H FY2021 | % Variance | |
| Distribution Per Unit (S$’cents) | 7.418 cents | 7.598 cents | +2.4% |
The following table is the REIT’s distribution payout on a full-year basis:
| FY2020 | FY2021 | % Variance | |
| Distribution Per Unit (S$’cents) | 14.688 cents | 15.258 cents | +3.9% |
If you are a unitholder of the REIT, here are some of the important dates relating to its distribution payout to take note of:
Ex-Date: 15 February 2022
Record Date: 16 February 2022
Payout Date: 11 March 2022
Closing Thoughts
As a unitholder, I must say that the blue-chip REIT’s latest set of results is a resilient one, and one where I’m satisfied to see – with its financial performance have improved due to acquisitions the REIT has made, its portfolio occupancy continuing to remain at a high percentage (where the portfolio occupancy rates of properties in Singapore, Australia, United States and United Kingdom/Europe have been maintained at above 90.0%, at 90.2%, 99.2%, 94.5%, and 96.7% respectively), and its debt profile continuing to remain very healthy (with its current aggregate leverage having a high debt headroom before the regulatory limit is reached.)
With that, I have come to the end of my review of Ascendas REIT’s latest results for the second half, and also for the financial year 2021 ended 31 December 2021. Do take note that everything you have just read above is purely for educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. You’re strongly advised to do your own due diligence before making any investment decisions.
Related Documents
Disclaimer: At the time of writing, I am a unitholder of Ascendas REIT.
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