12 things to know about Ascendas REIT before you invest

Ascendas REIT (A-REIT) was listed on 19 November 2002 as the first industrial REIT in Singapore. It owns a diversified portfolio of properties in Singapore and Australia ranging from business & science park properties, high-specifications industrial properties & data centres, light industrial properties & flatted factories, logistics & distribution centres, integrated development, amenities and retail properties. With a portfolio value of over S$10.2 billion, it is the largest REIT in Singapore.

In this article, I’ll bring a detailed account of past contributions of every property segment in A-REIT thus far and provide updates to assess whether it is capable of delivering sustainable distributions to unitholders in the near future. Here are 12 things you need to know about Ascendas REIT before you invest.

Segment results

1. The Business & Science Park Properties segment in Singapore is A-REIT’s largest segment and a key driver of growth. These properties are clusters of suburban offices, corporate HQ buildings, and R&D spaces. Over the last 10 years, A-REIT has expanded this segment from 12 properties worth S$650.0 million in 2007 to 26 properties worth S$3.64 billion in 2017. Consequently, its gross income has grown from S$54.3 million in 2007 to S$274.7 million in 2017.

Source: Annual Reports of Ascendas REIT

2. The High-Specifications Industrial Properties & Data Centres segment is the second largest segment of A-REIT. These properties include vertical corporate campuses with a combined office content and high-specifications mixed-use industrial spaces and data centres. Over the last 10 years, A-REIT has grown this segment’s portfolio from 14 properties worth S$816.2 million in 2007 to 21 properties worth S$1.94 billion in 2017. Its gross income has increased from S$84.6 million in 2007 to S$177.4 million in 2017.

Source: Annual Reports of Ascendas REIT

3. The Logistics & Distribution Centres segment is the third largest segment of A-REIT. The portfolio consists of distribution centres and warehouses where their tenants include third-party logistics providers, manufacturers, and trading companies. In this segment, A-REIT has expanded its number of properties from 18 in 2007 to 23 in 2010. Since then, it has maintained its portfolio at 23 properties worth S$1.28 billion as at 31 March 2017. This segment has reported growth in gross income, up from S$75.3 million in 2007 to S$123.1 million in 2017.

Source: Annual Reports of Ascendas REIT

4. The Light Industrial Properties & Flatted Factories segment consists of properties with low office content combined with manufacturing space. Flatted factories, a subset of light industrial properties, are stacked-up manufacturing space used for general manufacturing. A-REIT has maintained this segment’s portfolio at 30-35 properties throughout the 10-year period. In this segment, A-REIT has gradually increased its gross income from S$65.8 million in 2007 to S$93.4 million in 2017.

Source: Annual Reports of Ascendas REIT

5. The Integrated Development, Amenities & Retail Properties segment is the smallest segment of A-REIT. It consists of three properties: Courts Megastore, Giant Hypermarket and the Aperia which was acquired in 2014. The property is a three-storey retail and F&B podium integrated with the Business 1 Development in Kallang, Singapore. Presently, the Aperia is the biggest property and the main income contributor to this segment. Prior to its acquisition, this segment made S$15.0 million in gross income in 2014. It has since substantially increased to S$61.2 million in 2017.

Source: Annual Reports of Ascendas REIT

Australian acqusitions

6. In 2016, A-REIT acquired 26 premium logistics properties in Australia for S$1.0 billion. Subsequently, it acquired two more properties for S$222.2 million. As at 31 March 2017, this segment has 28 properties worth S$1.31 billion, accounting for 13.2% of A-REIT’s total portfolio. In 2017, the Australian properties segment contributed S$90.4 million in gross income.

Group results

7. A-REIT has achieved a CAGR of 11.7% in valuation of its investment properties over the last 10 years — from 77 properties worth S$3.27 billion in 2007 to 131 properties worth S$9.87 billion in 2017.

Source: Annual Reports of Ascendas REIT

8. Gross revenues have increased from S$283.0 million in 2007 to S$830.6 million in 2017. During the period, distributable income has grown from S$163.8 million in 2007 to S$420.3 million in 2017. The growth is in line with A-REIT’s expansion of its portfolio via acquisitions of new properties.

Source: Annual Reports of Ascendas REIT

9. A-REIT declared 15.953 cents in distribution per unit in its last financial year. As at 5 March 2018, A-REIT is trading at S$2.59 a unit. If it is able to maintain its distributions, its expected gross dividend yield is 6.2%.

Read also: 5 reasons why you should invest in S-REITs

Income visibility

10. As at 31 December 2017, A-REIT has a 91.1% occupancy rate for its portfolio. It has around 1,350 tenants and its top 10 tenants account for 20.6% of its gross rental income. This indicates that A-REIT is not substantially reliant on a single tenant or a single industry or a single piece of property for its source of income. As of 31 December 2017, 19.5% of A-REIT’s leases (based on gross revenue) will expire within the next 15 months. Therefore, the continuity of income from these leases depends on the management’s ability to secure renewals or new lease agreements for these spaces. On a positive note, 41% of leases will only start to expire in 2022 onwards. This adds to the income visibility of A-REIT.

Source: Ascendas REIT 3Q 2017 presentation

Growth drivers

11. As at 31 December 2017, A-REIT has total borrowings of S$3.65 billion and its aggregate leverage is 35.2%. Thus, the REIT has an available debt headroom of around S$1.0 billion to finance acquisitions for future growth. In March 2017, A-REIT acquired three properties in Australia: 52 Fox Drive in Melbourne for S$26.5 million, 100 Wickham Street in Brisbane for S$90.3 million, and 108 Wickham Street in Fortitude Valley for S$109.0 million. As such, Australia makes up 16% of A-REIT’s overall portfolio.

12. Ascendas-Singbridge is the sponsor of Ascendas REIT and a major shareholder via its interest in Ascendas Land (Singapore) Pte Ltd which owns a 17.68% stake in A-REIT. Ascendas-Singbridge is an urban and business space solutions provider with assets under management in excess of S$20 billion. As of 2017, Ascendas REIT has a pipeline of business and science park properties in Singapore worth of over S$1 billion from Ascendas-Singbridge that could provide growth through future potential acquisitions.

The fifth perspective

Since its listing in 2002, Ascendas REIT has built a track record of delivering growth in asset value, revenues, and income distribution to unitholders. In fact, as of January 2018, Ascendas REIT has returned 436% since its IPO inclusive of dividends. With a gearing ratio of 35% and an extensive pipeline of potential acquisitions, Ascendas REIT is currently in a firm position to grow its portfolio to increase and diversify its future income.

Finally, just a quick reminder: 2018 applications to join Dividend Machines close Sunday, 18 March 2018, at 23:59 hours. If you’re looking for a way to learn how to invest in dividend stocks and REITs and build multiple streams of passive dividend income, then we highly recommend you check out Dividend Machines before applications close!

Ian Tai is the founder of Bursa King, a data platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that helps investors unearth consistently profitable stocks from a database of over 900+ stocks listed in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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