Ascendas Real Estate Investment Trust (SGX: A17U) has the distinction of being one of the most consistent REITs in the market. Since it first went public in 2002, the industrial REIT has grown its portfolio to 171 properties worth upwards of S$11
Remarkably, Ascendas REIT has also managed to grow its distribution per unit (DPU) and net asset value (NAV) per unit consistently over that time. Furthermore, the size and stability of the REIT have now given it key advantages that it holds over other REITs. Let’s take a look at three of these.
Our FREE SGX stock pick!
Access to cheap equity capital
Because of its consistent track record of paying increasing distributions, investors are willing to purchase units of the REIT at a premium to book value. As such, Ascendas REIT is able to issue new units for equity fundraising at a premium to book value. For instance, in September, Ascendas REIT raised approximately S$452.1 million through a pre-emptive private placement. The new units were priced around 25% above its adjusted net asset value per unit.
Despite the new units being priced higher than its book value, the private placement was still 2.2 times oversubscribed. By issuing new units at higher than adjusted book values, Ascendas REIT can immediately increase its book value per unit for existing unitholders.
Contrast this with other REITs, which have units that currently trade well below their book values. These REITs would have to issue new units at a discount to book value, diluting existing unitholders and more likely than not, decreasing the REIT’s adjusted existing book value per unit in the process.
Top-notch credit rating
On top of the access to cheap equity, Ascendas REIT also boasts an A3 credit rating, which gives it the platform to raise debt capital at lower rates. Weighted average all-in borrowing costs were relatively low at 3.0% per annum in the last financial year ended 31 March 2019.
With 83.0% of its borrowings on a fixed rate, the REIT’s exposure to interest rate fluctuations is also minimal. In the last financial year, the REIT also issued S$125 million seven-year notes and S$250.2 million worth of 10-year notes, demonstrating that it has can raise debt through a variety of sources other than bank loans.
Ascendas REIT’s track record has also enabled it to build relationships with important companies. Most recently, it secured a partnership with local “superapp” unicorn, Grab, to design and build Grab’s new headquarters in One-North. The S$181.2 million property is expected to be completed in 2020, with Grab leasing 100% of the space for 11 years upon completion.
Source: Ascendas REIT Annual Report
The Foolish bottom line
The management team behind Ascendas REIT has undoubtedly done an excellent job in unlocking value for unitholders. Its size, well-managed balance sheet, and consistent DPU growth have, in turn, provided important advantages over its rivals. As such, Ascendas REIT looks well-placed to continue thriving for many years to come.
Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Jeremy Chia does not own shares in Ascendas Real Estate Investment Trust.