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5 Quick Takeaways From Ascendas REIT’s AGM
Corporate Digest | 01 July 2014
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By: Peter Ng
Articles (81) Profile

On top of the sumptuous food served to a shareholder at a company’s annual general meeting, there are five quick takeaways which a unitholder should know.

I have attended Ascendas Real Estate Investment Trust’s (A-REIT) annual general meeting and here are five things which a unitholder should know.

An all too common scene with A-REIT's logo slapped on buildings in the industrial estate

Location Determines Zoning, Which Determines Rental
It is a rather common fact that the location of a property ultimately determines its rental.

Further to this, the managers of A-REIT has taken the opportunity to clarify that the location of an industrial property also determines its zone.

In addition, the zone of a property will determine the options for its usage, which will directly affect the rent level which a property can command.

An example pertaining to Mapletree Business City (MBC) (owned by Mapletree Investments) and Aperia (owned by A-REIT) was quoted.

On top of their locations, MBC, which commands a higher rental is classified under the business park zone, while Aperia falls under the “B1” zone that commands a lower rental.

As such, this factor has to be taken into account when comparing different property yields.

More Acquisitions Of Business Parks Expected
It was shared that Ascendas Group, A-REIT’s sponsor, has $1 billion worth of business and science parks on its balance sheet.

Subjected to the maturity of the properties as well as Ascendas Group’s capital recycling programme, A-REIT views that the divestment of these properties to A-REIT is likely, however, without a definite timeline.

In addition, A-REIT noted that for the past ten years, Ascendas Group tends to unload properties on a frequency between every one or two years.

Higher Rental Reversions On Logistics And Distribution Centres
Based on FY13, a weighted average positive rental reversion rate of 14.8 percent was mainly attributable to a 17.2 percent upward revision of rental rates of A-REIT’s logistics and distribution centres.

The management clarified that the 17.2 percent includes an exceptional case where one particular lease for a single tenanted building was previously signed many years ago, where rental rates were much lower then.

Subsequently, the lease had expired and was renewed at the current market levels, which is much higher compared to the past. When excluded, the increment in rental reversion rates for logistics and distribution centres would have been closer to 11 percent.

Change Of Distribution Per Unit (DPU) Payment Frequency
On top of the downward revision of management fees payable to the managers of A-REIT, the frequency towards the payment of DPU has been changed from a quarterly to a semi-annual basis.

A-REIT is of the view that the change in DPU payment frequency allows the trust to better coordinate with the distribution of earnings in China, which is made semi-annually.

In addition, the move will also help to mitigate the issue of volatility in quarterly DPU and provide cost savings for the trust.

Property Tax Refund No More
From Jan 2014 onwards, Income Revenue Authority of Singapore has initiated a change in the policy on property tax refunds, such that property owners will no longer enjoy property tax rebates on vacant properties.

Henceforth, the $4.5 million in property tax rebates would have to be discounted from Jan 2014 onwards, translating into a $0.0019 loss in DPU.

Market Outlook
Given the Singapore Government’s guidance for a stable GDP growth of 2 percent to 4 percent in FY14, A-REIT is expecting for a stable performance during this period, driven by potential revenue upside as it has renewed 10.4 percent of expiring leases at higher prevailing market rates.

Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

Please click here for more information about this author.

Ascendas REIT  3.170 +0.02 +0.63%   
Business: Co invests in the real estate markets of Singapore and Australia.

Insight: Apr-19, FY19 gross revenue and NPI inched up 2.8% ... Read More

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