Category: A-REIT
A-Reit – BT
Ascendas Reit (A-Reit) has announced net property income increased by 20.9 per cent to $74 million for the third quarter FY2008/09 compared to a year ago.
This was attributed to organical growth of 38.2 per cent through rental rate increases.
Distribution per unit (DPU) for the three months ended 31 December 2008 was 4.05 cents per unit, an increase of 13.8 per cent on the 3.56 cents recorded in the same quarter of the last financial year. This represents an annualized yield of 11.6 per cent based on the closing price of $1.37 per unit on 31 December 2008.
As at 31 December 2008, A-REIT has 74.7 per cent of its total debt hedged into fixed rate for the next 3.7 years.
A-Reit’s manager also said it is in discussion with some of its existing lenders on the refinancing and extension of its loan facilities and will continue to explore various funding options to enhance its capital structure and to strength its balance sheet.
REITs – DBS
A tale of two Rs
Sector debt refinancing and recapitalising issues are likely to be the major drivers of the S-reit sector in 2009. As credit markets remain tight, access to credit takes priority over cost of funding. We see recapitalising prospects gathering momentum when asset writedowns begin. We see this as necessary to the sector but size and timing is uncertain under current market conditions. Valuationwise, these developments appear to have been largely anticipated in the share price, however, the uncertainty could hamper share price outperformance in the near
term. In terms of strategy, we prefer well-sponsored reits with good access to capital as well as those in the more resilient sectors such as retail, industrial and healthcare. Maintain buy on Parkway Life Reit and Areit and upgrade FCT on the back of attractive valuations.
Refinancing speed bumps linger: An estimated one third of the Sreit total indebtedness or $4.9b is due to be rolled over in 2009. The tight credit market environment would mean that access to funding would be crucial while increasing competition for funds would lead to an increase in cost of debt. Overall interest cost in the Sreit sector would rise above 4% from the present 3.2%. For every 50bps hike in average interest cost, DPU would be eroded by 10-15%.
Resetting the bar: We expect asset writedowns to begin as early as this year-end. Recapitalising issues are likely to gather momentum in the coming year, however, timing is uncertain as Sreits weigh the need to strengthen balance sheet against the commercial perspective of shareholder value dilution and investor appetite. Post funding, average DPU yield is estimated at 9% and P/adjusted book NAV of 0.75x, indicating that this possibility is reflected in the share price. Amongst Sreits, those with gearing closer to the 50% LTV mark and riskier sub-sectors such as office would have greater recapitalisation possibilities. This includes FCOT with a current loan to asset ratio of c49%. In the longer run, the higher geared reits such as CMT, Areit, CCT may look to strengthen balance sheet when equity markets recover.
Be selective: Given the headwinds from refinancing and recapitalisaton rises as asset writedowns, particular in the office segment, filter through, our strategy would be selective. In terms of large cap stock picks, we prefer Areit for its long lease tenure. In the mid cap sphere, we favour Parkway Life Reit and FCT with their resilient business model and attractive
valuations. Strong balance sheet and low gearing also reduces the need for recapitalising.
Link – Tables
AREIT – BT
Moody’s places A-Reit rating on review
MOODY’S Investors Service placed Ascendas Real Estate Investment Trust’s (A-Reit) A3 corporate family rating on review for possible downgrade. This is due to A-Reit’s continuing reliance on uncommitted revolving banking facilities to fund its asset growth and capital expenditure, Moody’s said.
AREIT – BT
Ascendas-Reit allays fears over TT International
Tenant has placed security deposit of 11.4 months rent, it says
ASCENDAS-REIT (A-Reit) has come out to reassure investors that its tenants are not in breach of rental obligations.
Reit manager Ascendas Funds Management said yesterday that tenant TT International placed a security deposit equivalent to 11.4 months’ rent, or $6.86 million. ‘If the tenant should default on its rental or lease obligations, this security deposit could be used to offset any potential negative impact on A-Reit’s financial results in the near term,’ it said.
The announcement was made after TT International said recently it was in default on certain fixed-rate notes and would seek a halt on repaying money owed to its principal bankers and all unsecured creditors.
TT International Tradepark (TTIT), a subsidiary of TT International, rents a six-storey warehouse and adjacent 10-storey office building from A-Reit, near Jurong East MRT.
With a net lettable area of 42,765 square metres, the property accounts for 2.3 per cent of A-Reit’s total net lettable space.
TTIT has a 10-year lease from March 2004 and accounted for 1.8 per cent of A-Reit’s total gross monthly revenue at Sept 30. TTIT’s current rent is $1.30 per sq ft per month.
The real estate investment trust manager said: ‘At this juncture, TTIT is not in arrears on its rental obligation.’
A-Reit has 88 properties in Singapore. Fifty-two of these are sale-and-leaseback properties, which A-Reit says have security deposits of 8-15 months. The weighted average time to expiry for the 52 properties is 7.8 years and none of them is up for renewal until the second half of FY2009/10.
An A-Reit spokeswoman said 80 per cent of A-Reit’s total rental income is paid by Giro, so defaults if any can be managed quickly. She said this is not an issue at present.
A-Reit has more than 860 international and local companies as tenants. Major tenants include SingTel, C&P Logistics, Siemens, TT International, Honeywell, Zuellig Pharma, LFD (Singapore), OSIM International, Venture Corporation, Federal Express, Freight Links Express, Johnson & Johnson, RSH, Infineon Technologies, Procter & Gamble and Hyflux.
AREIT – CIMB
Sailing the storm
• Maintain Outperform. We expect A-REIT’s income streams to come from its current development projects as well as built-in rental increases on its long leases. Additionally, management had been able to secure refinancing for S$500m of debt on a long-term basis almost one year before debt maturity on attractive rates and without the need to pledge assets or rental streams. This speaks volumes about the strength of its banking relationships. Reducing secured borrowings will afford AREIT more financial flexibility going forward.
• Resilient demand and diversified tenant risk. We expect new demand for industrial space to soften in tandem with an expected economic downturn. Nonetheless, existing demand is expected to stay resilient, with a lagged effect of about 18 months between a business slowdown and actual cutbacks in space. AREIT also has minimal tenant concentration risk with a tenant base of 860 as compared with MLT (224) and CIT (43).
• Unchanged DDM target price of S$2.17 (discount rate 8.7%). We continue to like A-REIT for its relatively resilient income streams anchored by long lease tenures, and leadership (through parent Ascendas) of the built-to-suit market. A-REIT remains the best proxy for business and science park space, the highest-quality segment of industrial space in Singapore. Maintain Outperform.