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Ascendas Real Estate Investment Trust: FY18/19 Scorecard

Ascendas Real Estate Investment Trust (SGX: A17U) recently released its annual report for the financial year ended 31 March 2019 (FY18/19). It was another busy 12 months for Singapore’s largest industrial REIT. Not only did it make its maiden acquisitions in the United Kingdom, but there was also a change of ownership to its sponsor (technically, the change of ownership was eventually approved by shareholders in April 2019, but the initial deal proposal was made in January 2019) and an equity rights issue. 

With that, here’s a quick look at the significant events that took place and whether it benefitted existing unitholders.

Entry into the UK

The first major event that occurred in Ascendas REIT’s last financial year was its maiden acquisition in the United Kingdom, comprising of 12 logistics properties for £207.3 million (S$373.2 million), which was completed on 16 August 2018. With the acquisition, Ascendas REIT gained exposure to a third market, adding to Singapore and Australia. 

On 4 October, the REIT quickly followed up its first acquisition with an acquisition of a second set of UK properties, comprising 26 properties.

I think the two acquisitions would most likely benefit unitholders over the long-term. Not only are the properties freehold, but they also command reasonable capitalisation rates and long average lease expiries. The acquisitions also provide revenue diversification and lower Ascendas REIT’s over-reliance on the Singapore industrial market.

Private placement to raise funds

On 6 September, Ascendas REIT launched a pre-emptive private placement to fund its UK acquisitions and build-to-suit business park development for tech unicorn, Grab. The private placement raised approximately S$452.1 million. The new units were priced at a 25% above the book value per unit and between 3.6% and 6.5% discount to the volume-weighted average price at that time.

I am usually not a fan of REITs choosing private placement over preferential offerings. However, the fact that the units were priced at a premium to book value still favoured existing unitholders. Technically, units issued at higher than book value will immediately be accretive to book value per unit. As such, I think that the issue price was not unfairly low, and the private placement was still positive for existing unitholders who could not participate in the exercise.

Change of ownership of sponsor

Perhaps the most significant event that occurred was CapitaLand Limited‘s (SGX: C31) acquisition of Ascendas REIT’s sponsor, Ascendas-Singbridge Pte Ltd. CapitaLand is a major real estate group in Asia, and its acquisition of Ascendas-Singbridge Pte Ltd brings its total assets under management to above S$116 billion. This makes it the largest diversified real estate group in Asia and one of the top 10 largest real estate groups in the world.

CapitaLand is also no stranger to REITs as it sponsors, manages and has large stakes in REITs such as CapitaLand Mall Trust (SGX: C38U) and CapitaLand Commercial Trust (SGX: C61U)As such, I believe Ascendas REIT looks to be in safe hands after the change of ownership.

The Foolish bottom line

It certainly has been an eventful year for Ascendas REIT, which despite its already large size, continues to seek opportunities to grow and diversify its revenue. I believe the three events listed above should each benefit unitholders over the long-term.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of CapitaLand, CapitaLand Mall Trust, and CapitaLand Commercial Trust. Motley Fool Singapore contributor does not own shares in any REITs mentioned.