Ascendas Reit’s Total Amount Available for Distribution for 1Q FY2019 grew 6.3% year-on-year
Ascendas Reit’s Total Amount Available for Distribution for 1Q FY2019 grew 6.3% y-o-y to S$124.7 million
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Ascendas Reit is Singapore’s first and largest listed business space and industrial real estate investment trust.
Total amount available for distribution rose 6.3% year-on-year (y-o-y) to S$124.7 million mainly attributable to contributions from new acquisitions in the United Kingdom (UK) and Australia during FY18/19. 1Q FY2019 Distribution per Unit (DPU) was stable y-o-y at 4.005 cents.
Portfolio occupancy rate stood at 91.1% (as at 30 June 2019) and positive rental reversion of 2.7% was achieved for leases that were renewed in 1Q FY2019.
Maintained healthy aggregate leverage of 37.2% and a high level of natural hedge in Australia and the UK.
Singapore, 29 July 2019 – The Board of Directors of Ascendas Funds Management (S) Limited (the Manager), the Manager of Ascendas Real Estate Investment Trust (Ascendas Reit), is pleased to report that gross revenue rose by 6.1% y-o-y to S$229.7 million. Key contributors were the newly acquired properties in the UK and Australia in FY18/19.
Property operating expenses decreased by 9.0% y-o-y to S$52.2 million. This was mainly due to the exclusion of land rent, which amounted to S$8.2 million, following the adoption of the new Singapore Financial Reporting Standard 116 Leases (FRS 116) effective from 1 April 2019.
Consequently, net property income rose by 11.5% y-o-y to S$177.5 million. Excluding the effects from the adoption of FRS 116, net property income would have risen by 6.3% y-o-y, in tandem with the increase in gross revenue.
Total amount available for distribution rose 6.3% y-o-y to S$124.7 million. Despite an enlarged number of Units in issue, DPU remained relatively stable at 4.005 cents (+0.1% y-o-y).
Mr William Tay, Chief Executive Officer and Executive Director of the Manager, said: “In view of the weak economic outlook, demand for industrial space in Singapore remains muted. However, Ascendas Reit’s stable performance in the first quarter of 2019 reflects the resilience of its large and diversified portfolio. This resilient performance was underpinned by proactive asset management as well as prudent diversification executed in the value-add strategy. We will continue to explore accretive investment opportunities in Singapore and other developed markets to grow and strengthen the portfolio.”
Summary of Ascendas Reit Group results (For the financial periods ended 30 June)
Number of Properties
Gross revenue (S$m)
Property operating expenses (S$m)
Net property income (S$m)
Total amount available for distribution (S$m)
1 Ascendas Reit has changed its financial year end from 31 March to 31 December. Therefore, the current financial year is a nine-month period from 1 April 2019 to 31 December 2019 (FY2019). Please refer to the announcement dated 24 July 2019 for more information.
2 As at 30 June 2019, Ascendas Reit had 98 properties in Singapore, 35 properties in Australia and 38 properties in the United Kingdom.
3 Included taxable and capital distributions of 3.495 and 0.510 cents respectively.
4 Included taxable and capital distributions of 3.671 and 0.331 cents respectively.
On 18 July 2019, the Manager entered into a sale and purchase agreement with Seow Kim Polythelene Co Pte Ltd for the sale of No. 8 Loyang Way 1 in Singapore for S$27.0 million1. The proposed sale price of S$27.0 million is 8.0% higher than the original purchase price (of S$25.0 million) and 14.4% higher than the market valuation (of $23.6 million2) as at 31 March 2019. The proposed divestment is expected to complete in 2Q FY2019 and the proceeds may be recycled to fund committed investments, repay existing indebtedness, extend loans to subsidiaries, fund general corporate and working capital needs.
A Well Diversified and Resilient Portfolio
Ascendas Reit has a well-diversified portfolio comprising properties across five industrial sub-segments3. As at 30 June 2019, the customer base of about 1,350 tenants is spread over 98 properties in Singapore, 35 properties in Australia and 38 properties in the UK. Singapore accounts for 79% of Ascendas Reit’s portfolio by asset value while Australia and the UK make up 14% and 7% respectively.
No single property accounts for more than 5.1% of Ascendas Reit’s monthly gross revenue. The stability of Ascendas Reit’s future performance is underpinned by the diversity and depth of its portfolio.
Ascendas Reit’s portfolio comprises 29.4% of single-tenant buildings and 70.6% of multi-tenant buildings by asset value. The portfolio’s weighted average lease expiry (WALE) declined to 4.1 years (31 March 2019: 4.2 years).
Overall portfolio occupancy rate declined to 91.1% compared to 91.9% in the previous quarter. This was mainly due to the lower portfolio occupancy rate in Australia, which fell to 92.3% (31 March 2019: 98.0%). During 1Q FY2019, there was a non-renewal of a lease at 94 Lenore Drive, a logistics property in Sydney. However, a new tenant has already commenced its five-year lease at the property with effect from July 2019.
The Singapore portfolio occupancy rate improved to 88.9% from 88.3% as at 31 March 2019 mainly due to new take-ups at 37A Tampines Street 92, 20 Tuas Avenue 1 and 10 Toh Guan Road. The UK portfolio occupancy rate remained at 100%.
Portfolio rental reversion4 of +2.7% was achieved for renewed leases in multi-tenant buildings during 1Q FY2019. The Singapore and Australian portfolios achieved +3.0% and +0.2% rental reversions respectively. There were no multi-tenant building renewals in the UK during the quarter.
Based on new leases signed, tenants from the transport and storage sector accounted for the largest proportion of new demand by gross rental income in 1Q 2019 (28.9%).
About 9.0% of Ascendas Reit’s gross rental income will be due for renewal in the remaining two quarters of FY2019. Of these expiring leases, 1.4% are from single-tenant buildings and 7.6% are from multi-tenant buildings. The Manager has been proactively working on the renewal of the leases and marketing the vacant space to maximise returns from its portfolio.
Proactive Capital Management
As at 30 June 2019, aggregate leverage stood at 37.2%. Weighted average all-in cost of borrowing was maintained at 3.0%. About 75.3% of Ascendas Reit’s borrowings are on fixed rates for an average term of 3.6 years.
The debt maturity profile remains well-spread with weighted average tenure of debt outstanding at 3.8 years.
A high level of natural hedge in Australia (75.4%) and the United Kingdom (100%) is maintained to minimise the effects of adverse exchange rate fluctuations.
Ascendas Reit continues to enjoy the A3 credit rating by Moody’s.
The global economic outlook continues to weaken amid uncertainties arising from the on-going trade frictions, political tensions and Brexit negotiations. Some central banks have signalled that they are prepared to lower interest rates to support economic growth.
Singapore’s 2Q 2019 GDP growth slowed to 0.1% y-o-y from 1.1% y-o-y in 1Q 2019. The manufacturing sector shrank by 3.8% y-o-y, deteriorating further from the 0.4% y-o-y contraction in the previous quarter. The Singapore government expects GDP growth for 2019 to be between 1.5% to 2.5% (source: Ministry of Trade and Industry). In view of the uncertain economic outlook, businesses are likely to remain conservative with their capital investments and expansion plans.
On top of the excessive new supply of industrial property space that was built-up over the last 4-5 years, an additional 2.7 million sqm of new industrial space is expected to complete in the rest of 2019 and in 2020, representing 5.5% of the total stock of 49.3 million sqm as at 30 June 2019.
Rental rates are expected to remain subdued, in view of the available industrial supply and moderated economic growth.
Assets under management (AUM) in Singapore stood at S$8.8 billion (79% of total property value as at 30 June 2019) underpinned by a diversified pool of tenants operating in across more than 20 industries. Properties in the business and science park segment, which makes up 42% of the Singapore portfolio, can serve the needs of industries in the new economy and this segment remains a key growth area for Ascendas Reit.
The Australian economy grew by 1.8% y-o-y in 1Q 2019 (4Q 2018: 2.3% y-o-y). Household spending moderated to 1.8% y-o-y (4Q 2018: 2.0%) as a result of weak discretionary spending. The Reserve Bank of Australia lowered the cash rate from 1.5% to 1.0% in 2Q 2019 to reduce unemployment and achieve its inflation target over time. Consensus GDP growth forecast for Australia in 2019 is 2.1% (Source: Bloomberg).
Ascendas Reit’s Australian properties are well-located in key industrial precincts. The stable performance of the portfolio is underpinned by the long weighted average lease to expiry of 4.3 years and average annual rent escalations of approximately 3% per annum.
United Kingdom (UK)
In 1Q 2019, the UK economy grew by 1.8% y-o-y (4Q 2018: 1.4% y-o-y). The services sector, which is the largest contributor to the UK economy, weakened slightly to 0.4% quarter-on-quarter (4Q: 0.5% q-o-q) whilst production output increased 1.1% q-o-q after recording a decline of 0.8% in 4Q 2018. Consensus GDP growth forecast for 2019 is 1.3% (source: Bloomberg).
With the on-going political and economic uncertainty arising from Brexit, leasing activity for the logistics sector has slowed in the first quarter of 2019. However, the sector remains fundamentally resilient as rents are expected to remain firm amidst supply constraints.
Ascendas Reit’s UK portfolio stood at S$0.8 billion (7% of total property value) as at 30 June 2019. Strong attributes such as the long weighted average lease to expiry of 9.1 years and the domestic nature of the tenants’ logistics business will stand Ascendas Reit in good stead to overcome any potential impact arising from Brexit.
Despite the uncertainty in the global economic outlook, the portfolio performance in the current three markets remains stable. The Manager will continue with our multi-pronged strategy to sustain the performance and complement it with disciplined and accretive investments in Singapore and other developed markets.
1 In accordance to Ascendas Reit’s Trust Deed, the Manager is entitled to a divestment fee of 0.5% of the sale price of the properties.
2 The valuation was commissioned by the Manager and the Trustee, and was carried out by Jones Lang LaSalle Property Consultants Pte Ltd using the capitalisation approach and discounted cash flow approach.
3 The five major industrial sub-segments are (1) business & science park/suburban office, (2) integrated development, amenities & retail, (3) high-specifications industrial properties/data centres, (4) light industrial properties/flatted factories and (5) logistics & distribution centres.
4 Percentage change of the average gross rent over the lease period of the renewed leases against the preceding average gross rent from lease start date. Takes into account renewed leases that were signed in 1Q FY2019 and average gross rents are weighted by area renewed.