3 Things Ascendas Real Estate Investment Trust’s Management Wants Investors To Know About Its Business

In late January, Ascendas Real Estate Investment Trust (SGX: A17U) released its third quarter earnings update for its fiscal year ending 31 March 2018 (FY2018). The reporting period was from 1 October 2017 to 31 December 2017.

As a quick introduction, Ascendas Real Estate Investment Trust is a REIT that owns industrial properties and business parks. At end-2017, it had 101 properties in Singapore, and 31 properties in Australia.

The Manager of the REIT had given a presentation on the trust’s latest results. In the presentation deck, I saw three slides about its business that I think investors should pay attention to.

The first slide shows a high-level summary of Ascendas REIT’s income statement for the third-quarter of FY2018:

Source: Ascendas REIT FY2018 third quarter earnings presentation

We can see that the REIT had a mixed quarter. Although gross revenue, net property income, and income available for distribution all increased, its distribution per unit (DPU) fell.

The REIT attributed its revenue growth to acquisitions (one property in Singapore and three in Australia) and the completion of redevelopment works at a property in Singapore in June 2017. These were partially offset by the sale of three properties (one in China, and two in Singapore). The fall in Ascendas REIT’s DPU was due to an increase in the number of units in issue.

The next slide I want to look at shows the occupancy rates of Ascendas REIT:

Source: Ascendas REIT FY2018 third quarter earnings presentation

Ascendas REIT’s occupancy rates in Singapore and Australia at December 2017 were higher than that seen in December 2016, so that’s a good thing.

In Singapore, the REIT’s 88.8% occupancy rate was ahead of the industry average of 84.5%. Similarly in Australia, the 98.5% occupancy rate was ahead of the industry average of 98.4%

The last slide I want to discuss shows Ascendas REIT’s lease expiry profile: :

Source: Ascendas REIT FY2018 third quarter earnings presentation

Ascendas REIT has an overall weighted average lease to expiry (by gross revenue) of 4.2 years. For a more granular take, 19.5% of the REIT’s leases will expire by FY18/19, 39.5% will expire in FY19/20 and FY20/21, and the remaining leases will expire only from FY21/22 onward.

One positive takeaway is that the trust has a staggered lease expiry profile, thus avoiding concentration of lease expiries in any one particular year.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.