Ascendas Reit delivers healthy operational performance in 1Q FY2020
- Portfolio occupancy rate improved quarter-on-quarter (q-o-q) to 91.7% and positive rental reversion of 8.0% was achieved for leases that were renewed in 1Q FY2020.
- Healthy aggregate leverage of 36.2% and strong liquidity position.
- Besides fully passing the benefit of any reduction in property tax granted by the Singapore Government to all qualifying tenants in Ascendas Reit’s Singapore portfolio, additional assistance will be provided to tenants in industries affected by COVID-19.
Singapore, 28 April 2020 – 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 Ascendas Reit delivered a healthy operational performance for the financial quarter ended 31 March 2020 (1Q FY2020).
Stable Operating Performance
Overall portfolio occupancy rate improved q-o-q to 91.7% (30 December 2019: 90.9%) mainly attributable to the higher occupancy rate of 88.6% (31 December 2019: 87.2%) in the Singapore portfolio on the back of higher demand for logistics space.
For the overseas portfolio, occupancies remained relatively stable at 97.3% in Australia, 92.9% in the United States (US) and 97.5% in the United Kingdom (UK).
Overall, the portfolio achieved a positive rental reversion1 of 8.0% for renewed leases in multi-tenant buildings in 1Q FY2020.
Mr William Tay, Chief Executive Officer and Executive Director of the Manager, said: “Ascendas Reit has delivered a healthy performance in the first quarter. Due to the on-going COVID-19 impact on the various world economies, we expect more challenges ahead. We have sufficient cash and committed undrawn credit facilities to meet current financial and operational obligations.
We are also aligning our operations and strategy to anticipate and meet these challenges. In line with its support for tenants, Ascendas Reit will be fully passing the benefit of any reduction in property tax granted by the government by way of a property tax rebate to its qualifying tenants. With this property tax rebate and additional rental assistance, its retail and F&B tenants within individual buildings and amenity centres will have their rents waived for two months, from April to May 2020. As the COVID-19 situation remains uncertain, Ascendas Reit will continue to engage its tenants and is prepared to render additional support should the situation worsen.”
So far, none of Ascendas Reit’s properties were shut down due to COVID-19. Tenants in the essential industries continue to operate normally.
The Manager is committed to safeguarding the health and well-being of its stakeholders. Temperature screening, health declarations, social distancing within the offices, increase in cleaning and disinfection frequencies have been implemented in its properties.
Robust Financial Metrics
As at 31 March 2020, aggregate leverage was healthy at 36.2%. Weighted average all-in cost of borrowing was maintained at 2.9% and its debt maturity profile remains well-spread with weighted average tenure of debt outstanding at 3.8 years.
Ascendas Reit’s liquidity position remains robust. Currently, operating cashflow is stable, underpinned by a S$12.8 billion diversified portfolio comprising of 45% business park/suburban office, 30% industrial properties and 25% logistics properties. In the event that COVID-19 prolongs, Ascendas Reit has in its reserves, S$490 million comprising of S$290 million in cash and S$200 million in committed facilities to make up for any shortfall.
A high level of natural hedge in Australia (76%), the UK (100%) and the US (100%) minimises the effects of adverse exchange rate fluctuations.
Value-Adding Investments
In March 2020, Ascendas Reit acquired a 25% stake in Galaxis, a prime business park property located in one-north, for a purchase consideration of $102.9 million2. The acquisition is accretive to Ascendas Reit’s Distribution per Unit and transacted at an attractive net property income yield of 6.2%. Galaxis is 99.6% occupied by highly reputable tenants such as Canon, Oracle and Sea (formerly Garena). The acquisition fits well with Ascendas Reit’s strategy to invest in well-located and high-quality business park properties in Singapore.
Capital Recycling
During 1Q FY2020, three Singapore properties, Wisma Gulab, 202 Kallang Bahru and 25 Changi South Street 1, were divested for total sales proceeds of S$125.3 million.
A Well Diversified and Resilient Portfolio
Total investment properties stood at S$12.8 billion, comprising of 197 properties located in four countries, Singapore (71% of total investment properties), Australia (13%), the US (10%) and the UK (6%).
The customer base of about 1,490 tenants is diversified over more than 20 different industries. Whilst some industries such as retail, aviation, oil and gas and hospitality & leisure are more affected by COVID-19, they make up less than 15% of Ascendas Reit’s monthly gross revenue. On the other hand, about 50% of monthly gross revenue is contributed by relatively more resilient industries such as financial services, government, data centres and biomedical.
Outlook
Presently, COVID-19 continues to damage the various economies around the world. It is uncertain when COVID-19 will be contained and businesses will return to normal. Realistically, more challenges and uncertainty are to be expected.
In anticipation of these challenges, the Manager is proactively marketing the vacant spaces in Ascendas Reit’s portfolio and engaging its customers digitally. Simultaneously, the Manager will exercise greater prudence, manage costs and improve efficiency.
Supported by a strong balance sheet, good liquidity position, well-diversified portfolio and strong tenant base, Ascendas Reit is well positioned to navigate the on-going challenges.
Notes:
1 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 FY2020 and average gross rents are weighted by area renewed.
2 The purchase consideration of Galaxis is estimated to be S$102.91 million, and is based on 25% of the adjusted net asset value of Ascendas Fusion 5 Pte Ltd, the holding entity for Galaxis, as at the date of acquisition completion, being 31 March 2020. The Adjusted Net Asset Value takes into consideration the agreed value of the Property of S$630.0 million.