Industrial REITs have been a bright spot in the REIT universe.
Throughout the pandemic, most of them have reported resilient rental income and healthy portfolio occupancy.
Ascendas REIT (SGX: A17U), or A-REIT, is no exception.
The oldest listed industrial REIT recently reported its fiscal 2021 (FY2021) earnings, and it was a pleasing set of numbers all around.
As of 31 December 2021, the REIT owned a total of 217 properties worth S$16.3 billion.
Here are five highlights from the industrial REIT’s latest financial results.
1. Improved financials, higher DPU
The REIT reported a 16.9% year on year increase in gross revenue to S$1.23 billion, lifted by contributions from newly-acquired properties and completed developments.
Net property income (NPI) climbed by 18.6% year on year to S$920.8 million.
Distribution per unit (DPU) inched up by 3.9% year on year to S$0.15258, and units of the REIT offer a trailing distribution yield of around 5.4%.
However, investors should note that A-REIT’s DPU is still lower than FY2019’s S$0.15638.
The number of issued units has also jumped by almost 28% from 3.2 billion in FY2019 to 4.1 billion in FY2021 as a result of a private placement and preferential offer during the two years.
2. Active capital recycling
A-REIT kept busy during FY2021 and completed a slew of acquisitions and developments totalling S$2.1 billion.
On the development front, A-REIT completed the construction of Grab’s (NASDAQ: GRAB) headquarters for S$184.6 million.
In addition, the REIT has also completed several asset enhancement initiatives (AEI) totalling S$23.3 million to spruce up properties in Singapore and Australia.
As part of the REIT’s active capital recycling initiative, it divested five properties in FY2021, collecting a total of S$247.9 million in sales proceeds.
3. Reasonable gearing
Despite the many acquisitions that the REIT had conducted in FY2021, aggregate leverage remained reasonable at 35.9% as of 31 December 2021.
The weighted average cost of debt has also steadily declined from 2.7% a year ago to just 2.2%, and the interest coverage ratio remained healthy at 5.7 times.
Close to 80% of the REIT’s borrowings are on fixed rates, which mitigates the risk of rising interest rates that result in higher financing costs.
A-REIT’s debt maturity is also well spread-out, with the latest maturity in FY2031. Average debt maturity stands at 3.5 years.
4. Healthy operating metrics
The REIT also reported healthy operating metrics, with portfolio occupancy rising from 91.7% in FY2020 to 93.2% in FY2021.
In particular, Singapore’s overall occupancy rose from 88.4% to 90.2%, Australia’s improved from 97.4% to 99.2%, and the US saw occupancy rates climb from 92.9% to 94.5%.
In the UK and Europe, however, occupancy dipped from 97.5% to 96.7%.
The good news is portfolio rental reversions were positive at 4.5% for FY2021, higher than the 3.8% registered for FY2020.
A-REIT’s portfolio weighted average lease expiry (WALE) stood at 3.8 years, with close to one-fifth of rental income up for renewal in FY2022.
5. Ongoing projects
A-REIT also has several ongoing projects to improve the quality of its portfolio.
Three projects are under development in Australia at an estimated total cost of S$251.2 million, with completion expected within this year.
The REIT is also undertaking redevelopments of its 34% stake in 1 Science Park Drive and iQuest@IBP for a total of S$384.5 million.
Completion is expected in 2Q2025 and 4Q2024, respectively.
The REIT also has a minor AEI at Changi Logistics Centre that should be completed by the second quarter of this year.
Get Smart: Stability and certainty
A-REIT is now a behemoth in Singapore’s REIT landscape, and investors can be assured that they can enjoy a good night’s sleep from owning a slice of Singapore’s oldest industrial REIT.
In addition, A-REIT’s sponsor, CapitaLand Investment Limited (SGX: 9CI), is also a reputable real estate giant with a pipeline of assets that can be injected into the REIT.
The REIT has come a long way since its IPO back in 2002, and there is every indication that this well-managed REIT can continue to grow its asset base and DPU.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.