CapitaLand Ascendas REIT (SGX:A17U), or CLAR for short, formerly known as just Ascendas REIT, is Singapore’s first and largest business space REIT, with its portfolio comprising of properties used for business space and life sciences (48%), industrial and data centres (27%), as well as for logistics (25%.)
As at 31 December 2022, the REIT’s portfolio comprises 227 properties in Singapore (62%), United States (15%), Australia (14%), and United Kingdom/Europe (9%), with a total asset under management of S$16.4 billion.
Following the end of the financial year on 31 December 2022 (you can read my review of the REIT’s results for the 2nd half, as well as for the full year here), the REIT have released its annual report early this morning (06 April 2023.)
For the benefit of those who do not have the time to go through the entire report, you can find my key takeaways from the report in this post, along with details about its upcoming AGM.
Summary of CapitaLand Ascendas REIT’s Annual Report
FY2022 Performance Highlights:
- Gross revenue grew by 10.3% year-on-year (y-o-y) to S$1,352.7m mainly due to the full year contribution of the portfolio of 11 data centres located across the UK/Europe acquired in March 2021; Galaxis in Singapore, with its remaining 75% interest acquired in June 2021; the portfolio of 11 logistics properties in Kansas City, USA, acquired in November 2021; completion of build-to-suit development of Grab Headquarters in July 2021. This is on top of contributions from acquisitions of 500 Green Road in Brisbane, Australia, and 7 Kiora Crescent in Sydney, Australia, in February 2022, and portfolio of 7 logistics properties in Chicago, USA, acquired in June 2022.
- Net property income rose 5.2% y-o-y to S$968.8m, consistent with the increase in gross revenue, but partially offset by higher utility expenses relating to the Singapore properties.
- Contributions from acquisitions and developments completed in FY2021 and FY2022 further boosted the REIT’s Distribution Per Unit (DPU) to 15.798 cents/share – up 3.5% y-o-y in FY2022.
- Portfolio occupancy reached a 10-year high of 94.6%, along with a robust rental reversion of 8% for leases that were renewed in the multi-tenanted buildings in FY2022.
- Balance sheet continue to remain robust, with aggregate leverage at a healthy level of 36.3%. At this level, there is a large debt headroom of about S$4.7 billion before the aggregate leverage reaches MAS’ regulated aggregate leverage limit of 50.0%. The REIT also has a high proportion of fixed rate debt at 79.4% for a weighted average duration of 3.3 years, allowing it to moderate its interest expense despite the rise in global interest rates.
Executing on its Strategy:
- The REIT’s core strategy remains centred on having a diversified portfolio comprising quality business space, logistics, and industrial properties, as well as data centres in developed markets, where they are firmly anchored in Singapore (where 62% of its properties are in the country), with the balance 38% in US, Australia, and UK/Europe.
- In FY2022, the REIT completed a S$223.4m of acquisition in the logistics sector – 2 properties in Sydney and Brisbane (S$90.2m), and 7 properties in Chicago, US (S$133.2m.)
- In early FY2023, the REIT embarked on 2 acquisitions with an aggregate purchase consideration of S$296.7m were completed in Singapore – a high-tech industrial property at 622 Toa Payoh Lorong 1 (S$104.8m), and a cold storage facility at 1 Buroh Lane (S$191.9m.)
- Additionally, the REIT have also undertook a US$40.0m convert-to-suit project of an existing office property in San Diego, US, to transform it into the global headquarters for a life science tenant, as well as redeveloped and repositioned UBIX (formerly known as 25 and 27 Ubi Road) into a premium industrial property with modern workspaces and large floorplates – the developments allowed the REIT to secure higher base rents and boost returns.
Making Sustainable Impact:
- In accordance with the requirements of the SGX Listing Rules, all Board Members underwent sustainability training in 2022.
- The REIT have continued to make progress on their sustainability journey, where (i) more properties in Singapore were fitted out with solar installations to increase renewable energy generation capacity, and more Electric Vehicle (EV) charging infrastructure were installed in its overseas properties; (ii) efforts were stepped up to green its properties by obtaining green certificates; (iii) additional Green Bonds and Loans were also issued in 2022 under the CLAR Green Financing Framework.
- It also participated in the GRESB Real Estate Assessment in 2022, with its score on par with global average.
- There will be various challenges ahead such as rising interest rates, inflation, and global economic uncertainties, which may impact tenants’ businesses, as well as CLAR’s operating costs.
- However, the REIT’s management is confident of managing these challenges and at the same time, is of the opinion that the REIT is well-positioned to capitalise on any growth opportunities that may arise to deliver sustainable returns to unitholders.
Conversations with CEO, Mr William Tay Wee Leong:
Impact of current high interest environment on acquisition strategy:
- The REIT maintains its fundamental approach in evaluating acquisitions, focusing on quality assets in prime locations with a well-leased tenant base, and long-term growth potential.
- In 2022, the REIT re-assessed its priorities and took a targeted approach to acquire assets leased to tenants associated with resilient industries such as healthcare, cold storage, and logistics – where it acquired 2 properties in Australia and 7 properties in the United States, along with another 2 properties in Singapore in early-2023.
- Moving forward, the REIT will stay selective and prudent in pursuing accretive opportunities in all 4 of its existing markets (Singapore, US, Australia, and UK/Europe), while at the same time, ensuring its current portfolio continues to perform optimally.
Geographical & Asset Class Allocation Strategy Going Forward:
- In the mid-term, the REIT’s management anticipate minimal changes to its Singapore/Overseas portfolio mix, as Singapore continues to be an important market for CLAR as it draws diverse and industry-leading players, making it an attractive pro-business gateway to Asia.
- Across all of the REIT’s markets, its strategic focus is to reposition its portfolio to better cater to the business needs of the technology, life sciences, and logistics industries.
Changes in Terms of Valuation of the REIT’s Portfolio Compared to FY2021:
- Valuation of portfolio in FY2022 remained largely unchanged compared to the previous year, with same-store portfolio valuation of 217 properties stable at $16.1 billion (underpinned by a resilient and diversified portfolio) as at 31 December 2022.
- On a geographical basis, valuations in local currency for its Singapore, US, and Australia portfolios recorded improvements, while its properties in UK/Europe declined due to data centres in UK/Europe (however, these data centres remained a small contributor to the REIT’s portfolio valuation, according for just 4.4% of CLAR’s total asset value of S$16.4 billion.)
Outlook of Portfolio Occupancy & Rent Reversion for FY2023:
- The CEO is confident that the broad asset classes in the REIT’s portfolio will continue to meet the requirements of its existing tenants, and at the same time, be able to attract new tenants in growing industries such as technology, logistics, biomedical and life sciences.
- In terms of rental reversion, it is expected to remain positive in the mid-single digit range for the coming year.
Green Initiatives and Achievements in 2022, as well as Plans for 2023:
- An additional 22 green certificates across its portfolio have been obtained, bringing the total number of green certified properties owned and operationally controlled by CLAR to 59.
- As at 31 December 2022, about 76% of its owned and operationally controlled properties by GFA (Gross Floor Area) were green certified.
- Solar panels were installed on rooftops in 10 of its properties, bringing a total of 17 properties in its portfolio with solar panel installations that are expected to generate over 18 GWh of renewable energy annual and avoid over 7,466 tones of carbon emissions – in 2023, the REIT is targeting to install solar panels in 7 more properties, generating an additional estimated 4.5 GWh of solar power annually.
- 46 EV charging points were rolled out across 13 properties, bringing the total number of EV charging points across CLAR’s properties in Singapore and Overseas to 273.
- Issued $623m of Green Bonds and Loans in 2022, bringing its total green financing to S$1.84 billion, or 28% of CLAR’s total borrowings.
- Began to adopt recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) in the REIT’s Integrated Sustainability Report, and will continue to enhance disclosures and transparency in-line with the requirements set out by SGX and MAS for 2023.
- Stepped up on implementation of green leases for new tenants, which include clauses for data sharing with landlord – with input from tenants, the REIT could enhance the scope and accuracy of its data analysis and improve on its ESG reporting.
- Finally, on achievements, CLAR is on par with global average in the GRESB Real Estate Assessments 2022, as well as obtaining an ‘A’ rating for the GRESB Public Disclosure Assessment for 3 consecutive years.
Notice of CapitaLand Ascendas REIT’s Upcoming AGM
When? Friday, 28 April 2023
Where? Pan Pacific Hotel, Level 1, Pacific 2 & 3 Ballroom (7 Raffles Boulevard, Singapore 039595)
Do note that no food or snacks will be served, and there will be no distribution of vouchers or door gifts at the upcoming AGM, as well as at future AGMs.
If you intend to attend the meeting in-person, and if your unitholding is in your CDP, CPF or SRS account, there is no need for you to pre-register, as your unitholding will be verified on the spot. However, if your unitholding is held in a custodian account, you will need get in touch with your brokerage platform to submit a request for you to attend as a proxy.
Unitholders also have the option to watch the live screening of the AGM remotely, and you can pre-register here – However, do take note that you will not be able to submit questions or vote.
Personally, I will be watching the live screening of the AGM, and for the benefit of those who aren’t able to attend, I’ll be posting a summary of it in due course.
Learn More about CapitaLand Ascendas REIT in the Upcoming REITs Symposium
Happening on Saturday, 20 May 2023, at Suntec City Convention Summit 1 & 2 (Level 3) from 9am – 6pm, CapitaLand Ascendas REIT will have a booth set up, with representatives available for you to learn more about the REIT, as well as to ask any questions you may have.
If you like to sign up to attend the event, you may do so here.
Disclaimer: At the time of writing, I am a unitholder of CapitaLand Ascendas REIT.
Launch Event for My First Book: building your REIT-irement portfolio
After months of hard work, my first book, 'Building Your REIT-irement portfolio' is finally ready! In this easy-to-follow 178-page guide, you'll learn everything you need to know about building a REIT portfolio that can provide for you in your retirement years. You can check out a preview of the book here.
I'm extremely thankful to the team at InvestingNote and ShareInvestor for their help to organise a book launch event for me on Tuesday, 26th September 2023, from 6:00pm to 8:00pm at their office in New Tech Park.
For more details and to RSVP (seats are extremely limited), click on the link below: