Ascendas Real Estate Investment Trust’s Australian Portfolio Acquisition: Here’s What You Need to Know

Ascendas Real Estate Investment Trust (SGX: A17U) is one of the cool stocks in Singapore that shares webcasts of its presentations.

There may be new information investors can pick out from these webcasts.

Ascendas REIT had recently given a presentation on its latest Australian Logistics portfolio acquisition and I’ve managed to learn some useful things from viewing a recording of it (the link can be found here).

As a brief background before we get into it, Ascendas REIT is one of the largest business space and industrial real estate investment trusts in Singapore. With more than 100 properties here and two business parks in China, the REIT’s total assets amounted to more than $8.3 billion as of 30 September 2015. You can read more about Ascendas REIT in here.

Now, let’s dig into the six things I had learnt from the presentation:

  1. To start off, let’s look at the major points of the deal. The acquisition consists of 26 freehold properties that are located in key cities in Australia, namely Sydney, Brisbane, Perth, and Melbourne. The purchase price in consideration is A$1.013 billion. The acquisition also brings Ascendas REIT’s overseas exposure to 14% of assets under management.
  2. The Australian portfolio’s occupancy rate is north of 94%, while the weighted average lease expiry (WALE) stands at 6.1 years. This compares with a WALE of 3.7 years for Ascendas REIT’s current portfolio. The REIT’s WALE after acquisition is expected to increase to 4 years. Ascendas REIT also sees the potential to raise the Australian Portfolio’s occupancy to 98.3%.
  3. The new acquisition also consists of newer properties with an average age of 6.4 years. This compares with the REIT’s current portfolio average of around 13 years.
  4. Ascendas REIT plans to finance the deal through a rough 60:40 mix of debt and perpetual securities. The REIT will be taking on a loan of A$600 million. The plan is to hedge the expected net cash flow.
  5. Responding to a question on the acquisition’s price tag, Tan Ser Ping, the Chief Executive Officer of Ascendas REIT’s manager, said that the REIT took into account the quality of both the portfolio (including the building’s age) as well as the tenant profile. Tan added that a deal of this size and scale is rare.
  6. On a question on Australia’s economy, Tan said that the country’s performance over the years has been stable and pointed out that there has been little correlation between the Singapore and Australian economy.

Foolish takeaway

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The access to management teams via webcasts gives investors a fair chance to judge for themselves whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around an investment and keep up with developments in its industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.