Ascendas REIT unit price performance above market average

Outlook for Ascendas REIT 'sanguine' despite gloomy outlook for industrial rents.

According to OCBC Investment Research, Ascendas REIT’s (A-REIT) unit price performance has attested to its resilience, gaining 10.4% YTD as opposed to a 4.3% increase in the broader market.

"The strength, in our opinion, is mainly attributable to its diversified portfolio of 102 properties, healthy lease
profile (high occupancy of 96.4% and WALE of 4 years), strong sponsor and quality management," it said in a report.

OCBC notes that outlook is also expected to remain 'sanguine', with recent acquisitions and developments likely to
contribute positively to its performance.

"Despite market concerns that the industrial rents may ease slightly in 2012, we still see potential for A-REIT to register positive rental reversions, as the passing rents for the area due for renewal are currently 16-32% below the spot market rates," it said.

Here's more from OCBC:

A-REIT has also been very proactive in its capital management. Riding on its sturdy unit price performance, the REIT strategically issued out 150m new units at S$1.99 apiece (6.0% premium to NAV) via a private placement in May.

All the net proceeds, amounting to S$296.9m, had since been used to repay its outstanding borrowings, which effectively pared down its aggregate leverage from 36.6% as at 31 Mar to 32.1%.

In addition, we note that A-REIT has announced the divestment of Goldin Logistics Hub at 6 Pioneer Walk for S$32.1m, representing a respectable 36.2% premium over its latest disclosed valuation of S$23.5m in Mar 2011.

As a result, A-REIT’s fortified financial position will likely provide it with greater financial ability to capitalize on growth opportunities, as well as secure borrowings at potentially more competitive terms to fund its committed
investments.