Here’s why Brexit has sent Ascott Residence Trust reeling

The GBP has been on a tailspin.

Ascott Residence Trust (ART) is on shaky ground, as the UK’s recent vote to exit the European Union has sent the GBP on a nosedive.

According to a report by OCBC, ART saw 12.4% and 13% of total assets and gross profit from the UK in FY15, respectively. OCBC further shares that ART does not hedge its estimated distributable income in GBP, though there is some natural hedge to its balance sheet.

On the other hand, Brexit will be a boon for a handful of local REITs.

“Given the continued vagaries in the macroeconomic and geopolitical landscape, we see a structural shift towards a prolonged period of accommodative interest rates and believe that defensive yield plays are likely to enjoy significant tailwinds ahead,” asserts OCBC.

Meanwhile, OCBC champions Frasers Centrepoint Trust, Keppel DC REIT (KDCREIT) and Ascendas REIT for their defensive attributes, robust management team, and solid financial position.

Notably, though KDCREIT saw its London data centre contribute 7.5% of its FY15 investment properties’ carrying values, the company will still come out largely unscathed. This is thanks to the asset’s long master lease which expires in 2027, as well as management hedging 100% of its foreign-sourced distribution until end-2017.