Ascendas REIT - OCBC Investment 2021-04-26: Mixed Operating Metrics

ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)

Ascendas REIT - Mixed Operating Metrics

Ascendas REIT (SGX:A17U) provided a business update for its 1Q21 performance. No income statement financial metrics were disclosed, but operationally, Ascendas REIT said that its portfolio occupancy declined slightly by 1.1 percentage points (ppt) q-o-q to 90.6%. Only its UK/Europe assets showed an improvement in occupancy (+1.1 ppt to 98.6%), while there were declines seen in Singapore (-1.5 ppt to 86.9%), Australia (-2.5 ppt to 94.9%) and the US (-0.4 ppt to 92.5%).
For Singapore and Australia, there were one building each which became vacant following non-renewals, and the building in Singapore has been earmarked for redevelopment.
On the other hand, Ascendas REIT’s Unit 5, Wellesbourne Distribution Park property in the UK saw its occupancy move from 0% to 100%, while it completed the acquisition of a portfolio of 11 data centres in Europe on 17 Mar 2021. Following this acquisition, data centres formed 10% of Ascendas REIT’s total AUM of S$15.1b.

Although occupancy disappointed, Ascendas REIT’s average portfolio rental reversions came in positive at 3.0% for 1Q21.
In Singapore, this was +2.9%, as rental uplifts in its Business & Science Parks (+2.8%), Logistics & Distribution Centres (+5.6%) and Light Industrial and Flatted Factories (+0.8%) segments were partially offset by declines at its Integrated Development, Amenities & Retail (-2.7%) and High-Specifications Industrial and Data Centres (-0.9%) segments. Management reiterated its guidance for positive low-single digit rental reversions for FY21.

Ascendas REIT’s aggregate leverage ratio increased from 32.8% (as at 31 Dec 2020) to 38.0% after the completion of the aforementioned acquisition of the portfolio of 11 data centres in Europe. However, its weighted average all-in debt cost fell by 50 basis points q-o-q to 2.2% which was likely due to the lower funding costs for the European acquisition.
We maintain our forecasts and S$3.84 fair value estimate for Ascendas REIT.
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OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2021-04-26

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