SINGAPORE (Nov 1): The manager of Ascendas Real Estate Investment Trust (Ascendas REIT) has announced a 2.3% increase in distribution per unit (DPU) to 3.978 cents for the 2Q19 ended September, from DPU of 3.887 cents a year ago.
Total income available for distribution grew 7.6% y-o-y to $123.8 million in 2Q19, from $115.0 million a year ago.
The distribution will be paid on Dec 3.
2Q19 gross revenue grew 5.3% to $229.6 million, on the back of full quarter contribution from the 38 logistics properties in the UK that were acquired between August and October 2018.
Property operating expenses fell 12.7% to $51.7 million during the quarter, due to the adoption of a new accounting standard, which resulted in land rent expense not being included in the property operating expenses for 2Q19.
Consequently, net property income rose 12.0% to $177.9 million in 2Q19, from $158.9 million a year ago.
As at end-September, cash and cash equivalents stood at $80.4 million.
“This quarter, our overseas acquisitions helped boost DPU by 2.3%. We will continue to diversify our portfolio geographically to ensure resilience and future growth,” says William Tay, CEO and executive director of the manager.
To this end, the manager of Ascendas REIT on Friday also announced the proposed acquisition of a portfolio of 30 business park properties – 28 in the US and two in Singapore – for $1.66 billion.
Post-transaction costs, the proposed acquisitions are expected to generate a first year net property income yield of 6.3% for the REIT. The transaction is also expected to be distribution per unit (DPU) and DPU yield accretive for the REIT.
To help fund the proposed acquisitions, the manager has proposed to undertake an underwritten and renounceable rights issue of some 498 million new units in Ascendas REIT at an issue price of $2.63 per unit to raise gross proceeds of around $1.31 billion.
The issue price represents a discount of around 17.0% to Ascendas REIT’s closing price of $3.17 per unit on Oct 31, the last trading day prior to the announcement.
See: Ascendas REIT to acquire 30 business park properties from CapitaLand for $1.66 bil; launches rights issue at $2.63 per unit to raise $1.31 bil
Speaking at Ascendas REIT’s results briefing on Friday, Tay notes that the group decided to move into the US because of “its deeper and larger market” as compared to the opportunities presented in Australia, the UK and Singapore – countries that the REIT already has a presence in.
Of the 28 properties in the US, 15 will be in Portland, five will be in Raleigh, and the remaining eight will be in San Diego, Tay says. “Each city has its own ecosystem” he notes.
He adds that these three cities were identified based on their tech opportunities, which is a key area of focus for the REIT. Tay says he believes tech has a huge role to play in today’s economy, and is adopted in several segments such as the future of work, finance and logistics sectors.
In spite of the ambitiousness of this move, Tay is already keen to “deepen [Ascendas REIT’s] presence in the US – not just in the three cities but also in the other tech cities on the sunshine belt”.
As for Singapore, the REIT is looking at two properties – Nucleos at Biopolis and the FM Global Centre at Singapore Science Park 2. They have a WALE of 56.7 years and are expected to complement and strengthen the REIT’s existing business and science park portfolio, Tay says.
With the acquisitions, Ascendas REIT’s investment in the business and science park segment will be up 46 to $5.41 billion – constituting 42% of its total asset value of $12.8 billion.
However, in spite of exploring opportunities elsewhere, Tay says that Singapore will continue being the main market in its portfolio, as part of its commitment towards being Singapore-focused company.
The manager of Ascendas REIT had called for a trading halt before market open on Friday, pending the acquisition announcement. Units in the counter closed at $3.17 on Thursday.
Year-to-date, units in Ascendas REIT are trading 24.2% higher.
