Its business and science park segment saw double-digit rent increases in first half of this year despite Covid-19 pressures

 

ASCENDAS Reit on Thursday posted a resilient set of financial results for the first half of the year even after including rental assistance to tenants, and it remains optimistic on its rental outlook going forward.

 

For the six months ended June 30, 2020, distribution per unit (DPU) fell to 7.27 Singapore cents, compared to 8.153 cents paid out a year ago, due to an enlarged unit base by more than 500 million units in the wake of its rights issue in December 2019.

 

But William Tay, CEO of the manager, said at a briefing: " We have not held back any dividend we don' t see a need right now" - a contrarian move to other Reits that have held back some amount to help their cash flow during this period.

 

For the first half, gross revenue rose 14.6 per cent to S$521.2 million, mainly due to half year contributions from the US portfolio of 28 business parks and two Singapore business parks acquired last December.

 

This was partially offset by some S$20 million in rent rebates provided for eligible tenants affected by the Covid-19 pandemic, the divestment of Wisma Gulab in January 2020, as well as lower occupancies at some properties.

 

Net property income went up 11.2 per cent to S$388 million, while total amount available for distribution rose 3.7 per cent to S$263.2 million.

 

Portfolio occupancy rate held fairly steady at 91.5 per cent as at end-June 2020. The Reit also managed a positive rental reversion of 5.4 per cent for leases renewed in the six months, mostly from the business and science park segment (up 16.3 per cent) and integrated development, amenities and retail segments (up 19.8 per cent) in Singapore, as well as its logistics and distribution centres in Australia (up 16.6 per cent) and business parks in the US (up 16.2 per cent).

 

For the full year, it is now expecting a positive single-digit rental reversion. That said, it is tempering its expectations on new tenant take-up, amid caution among potential tenants in this uncertain climate. As a result, occupancies could trend down subsequently, Mr Tay said.

 

The reporting period saw logistics and supply chain management companies make up about 23 per cent of new demand, based on gross rental income. Some of this was for the purpose of stockpiling and were for as short as three months, which also allowed the Reit manager to request for higher rents. At the same time, there was also demand for space from the biomedical and healthcare industries.

 

Regarding the Reit' s 4.75 per cent S$300 million perpetual bonds which is approaching their first call date in October later this year, Yeow Kit Peng, head of capital markets & Investor relations at Ascendas Reit said it has several options, including refinancing it with a bond, allowing it to reset (in which case the perp coupon would fall to about 3 per cent), or pay down the perp and then issue a new perpetual bond.

 

" We will consider the rates and the funding certainty and also, we want to achieve an optimal capital structure and not have any negative impact on the portfolio or the A3 credit rating (by Moody' s). But in short, whichever option we choose, there will be interest savings for Ascendas Reit," she said.

 

On the acquisition front, it is on the lookout for assets that support drivers of the economies in the respective countries it is located in, such as logistics properties and business parks in the UK, technology-related assets in the US as well as data centre assets in Singapore and overseas.

 

THE manager of Ascendas Real Estate Investment Trust (A-Reit) on Wednesday announced an agreement to buy a new logistics property in Sydney, Australia, for A$23.5 million (S$21.1 million). The acquisition will be accretive to A-Reit&rsquo s distribution per unit.

 

A-Reit has purchased a 26,632 sq m piece of freehold land in the Yennora suburb of Sydney, an industrial precinct, from an entity called Larapinta Project. Larapinta will also develop the property, which is expected to be completed in the second quarter of 2021.

 

A-Reit announced that the purchase consideration &ndash which includes both the land and development cost &ndash is 19.8 per cent below what it would have cost it to buy a similar completed property.

 

On top of the purchase price, A-Reit will incur transaction costs of A$1.4 million for fees and duties.

 

The net property income yield for the first year is estimated to be 5.8 per cent after taking into account the transaction costs. This yield factors in a rental guarantee of 9.5 months from Larapinta Project.

 

William Tay, executive director and chief executive of A-Reit&rsquo s manager, said Sydney continues to be the &ldquo strongest industrial market&rdquo in Australia, with &ldquo robust tenant demand and sustained levels of investor interest&rdquo .

 

The property, which lies 26 km west of Sydney&rsquo s central business district, will have 13,100 sq m of lettable floor area.

 

Larapinta Project is listed as an associated entity of Trinity Development Group in the 2009-2010 annual report of Trinity Group. At the time, Trinity Group was an ASX-listed Australian property business with interests in Trinity Development Group.

 

A spokesperson from the manager of A-Reit desribed Larapinta Project as a " local private developer" in response to a query from The Business Times.

ASCENDAS Reit (A-Reit) estimates that rent waivers provided to its tenants in Singapore year to date amount to less than S$20 million. The actual amount to be disbursed will depend on tenants' eligibility assessment by the authorities. 

 

This amount is in addition to the Singapore government&rsquo s property tax rebates and cash grants which the trust will fully pass through to eligible tenants.

 

The information is part of a filing by A-Reit on the Singapore Exchange website, of its responses to shareholders' questions submitted ahead of its annual general meeting on Monday. " SME tenants currently make up less than 20 per cent of Ascendas Reit&rsquo s Singapore portfolio by gross rental income. About 12 per cent   of these tenants are F& B and retail SMEs and the remaining 88 per cent are industrial SMEs," A-Reit said.

 

To date, none of the trust' s tenants has pre-terminated a lease due to Covid-19 in all the four countries that A-Reit operates in - Singapore, Australia, UK and the US.

 

Asked about the impact of rental deferments and rebates given to tenants on the trust' s distribution per unit for the financial year ending Dec 31, 2020, A-Reit said: " There will be an impact on the dividend distribution, although...the impact of Covid-19 on Ascendas Reit has been minimal. So far, we see no reason to hold back any dividends and we will continue to monitor the circumstances and business environment."