Listed on the Singapore Exchange in November 2002 with total investment properties at just S$0.6 billion, CapitaLand Ascendas REIT’s (SGX:A17U) total investment properties have grown multi-folds since – where it is now at S$16.7 billion.
The REIT is also Singapore’s first and largest listed business space and industrial REIT, as well as a constituent in the Straits Times Index (STI), Singapore’s benchmark index since June 2018.
Following the REIT’s AGM for FY2022 last Friday (28 April) afternoon (for those of you who have missed it, you can read a summary I’ve compiled about it here), the REIT have made avail its business updates for the first quarter of the financial year 2023 ended 31 March (i.e. Q1 FY2023) after market hours this evening (02 May 2023.)
As the REIT has switched to half-yearly reporting of its financial performance, for the current quarter under review, it only shared an update of its portfolio occupancy and debt profile – both of them we will be looking at in today’s post:
Portfolio Occupancy (Q4 FY2022 vs. Q1 FY2023)
When it comes to reviewing a REIT’s portfolio occupancy, I will always take the statistics reported for the current quarter under review, and compare them against that reported in the previous quarter 3 months ago to find out whether they have continued to remain resilient.
In the table below, you’ll find a comparison of CapitaLand Ascendas REIT’s portfolio occupancy for Q1 FY2023 ended 31 March 2023 against that recorded in Q4 FY2022 ended 31 December 2022:
| Q4 FY2022 | Q1 FY2023 | |
| Portfolio Occupancy (%) | 94.6% | 94.4% |
| Rental Reversion (%) | +8.0% | +11.0% |
| Portfolio WALE (by Gross Revenue – years) | 3.8 years | 3.8 years |
My Observations: Even though its portfolio occupancy dipped slightly (by 0.2 percentage points), but at 94.4%, it is still very resilient, with the overall occupancy rates of the properties in the various geographical locations as follows: Singapore (92.3%), United States (92.5%), Australia (99.3%), United Kingdom/Europe (99.5%.)
Another thing about the REIT’s latest set of portfolio occupancy statistics that impressed me was its rental reversion at a positive double-digit percentage – at +11.0% – which can be attributed to renewals of leases in the following properties at very favourable rates (with the rental reversion in brackets): business space and life science properties in Singapore (+11.5%), logistics properties in Singapore (+23.6%), business space properties in the United States (+11.3%), and business space properties in Australia (+18.1%).
Debt Profile (Q4 FY2022 vs. Q1 FY2023)
In the current high interest rate environment, a REIT’s debt profile becomes more closely monitored by unitholders – where most would prefer to invest in REITs that have a lower aggregate leverage (preferably under 40.0%), and also a higher percentage of borrowings hedged at fixed rates (preferably at 80.0% or above, as those that do not will see their interest payments spike as a result of increase in interest rates, thereby impacting distributions to unitholders.)
So, did CapitaLand Ascendas REIT’s debt profile fulfil the 2 conditions above? Let us find out in the table below, where I will be comparing the stats reported for the current quarter under review (i.e. Q1 FY2023 ended 31 March 2023) against that reported in the previous quarter 3 months ago (i.e. Q4 FY2022 ended 31 December 2022):
| Q4 FY2022 | Q1 FY2023 | |
| Aggregate Leverage (%) | 36.3% | 38.2% |
| Interest Coverage Ratio (times) | 5.2x | 4.7x |
| Average Term to Debt Maturity (years) | 3.7 years | 3.2 years |
| Average Cost of Debt (%) | 2.5% | 3.3% |
| % of Borrowings Hedged at Fixed Rates (%) | 79.4% | 77.0% |
My Observations: No surprises there in the current high interest rate environment that the REIT’s debt profile weakened slightly compared to the last quarter 3 months ago – that said, however, its aggregate leverage, at 38.2%, still remains healthy in my opinion.
In terms of debt maturity, it is well-staggered out over the years – for the remaining 3 quarters of the current financial year 2023, it has S$1,022m (or 15.4%) of borrowings due to refinancing, another S$862m (or 13.0%) of borrowings due for refinancing in FY2024, S$850m (or 12.8%) of borrowings due for refinancing in FY2025, and S$3,842m (or 58.8%) of borrowings due for refinancing only in FY2026 or later.
Finally, in terms of interest rate hikes on distribution payouts, a 100 bps increase in interest rate on variable debt is expected to have a pro forma impact of S$14.8m decline in distribution, or 0.35 cents decline in DPU.
Closing Thoughts
Pretty stable set of statistics as far as its portfolio occupancy and debt profile are concerned – for the former, the occupancy rates of its properties in the different geographical locations are at above 90.0%), and for the latter, its aggregate leverage, at 38.2%, still remains a safe distance away from the regulatory limit of 50.0%.
With that, I have come to the end of my short review of CapitaLand Ascendas REIT’s latest business update for the first quarter – hope you’ve found the contents useful, and do take note that all the opinions that you find are mine, which I’m sharing for educational purposes only. 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.
Learn More about CapitaLand Ascendas REIT in the Upcoming REITs Symposium 2023
Together with 3 other CapitaLand REITs in CapitaLand Ascott Trust, CapitaLand India Trust, and CapitaLand Integrated Commercial Trust, they will be setting up a booth in the upcoming REITs Symposium 2023 (a one-day event held on Saturday, 20 May, from 9am – 6pm at Suntec Convention Summit 1 & 2), with representatives present for you to get a better understanding of them.
Apart from the 3 CapitaLand REITs, there are 19 other Singapore-listed REITs that will have booths set up for you to learn more about. This is on top of discussions with industry experts where they will be sharing with you their views on topics including the outlook of the economy for the 2nd half of 2023, whether REITs still make a viable investment option in the current high interest rate environment, how retail investors can manage REITs passively and effortlessly, opportunities and challenges in the post-pandemic era, and more, through a series of panel discussions which you can listen to (and ask questions if you have any.)
As for myself, I’m deeply honoured to be invited as one of the panelists for the event, where, together with veterans Gabriel Yap (author of the bestselling title ‘Making Your Millions in REITs’), and Willie Keng (founder of investment blog ‘Dividend Titan’), we will be sharing our experiences in REIT investing in the session ‘Show & Tell: Maximising Passive Income From REITs’ between 5.00pm and 5.45pm.
Find out more about the event, and also secure your seat to learn more about REITs, here. For readers of ‘The Singaporean Investor’, you can apply the code RS23JY (limited quantities available) to enjoy a 50% discount off your ticket purchase – do note that if you do not see any price discounts reflected after applying the code, it means that the maximum limit for the code has been reached – to avoid disappointment, I strongly encourage you to act fast, so you can attend the information-packed event at a hugely discounted price.
For those who have already signed up for it, thank you, and I look forward to meeting up with you in-person on 20th May at the event!
Related Documents
Disclaimer: At the time of writing, I am a unitholder of CapitaLand Ascendas REIT.
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