Ascendas REIT fiscal 2Q net property income slipped 1 percent, missing analyst forecast

Singapore one dollar bill

Ascendas REIT reported on Thursday that its fiscal second quarter net property income fell 1.0 percent on-year to S$158.9 million amid a rise in property expenses due to acquisitions.

Gross revenue for the quarter ended 30 September rose 1.1 percent on-year to S$218.13 million, Ascendas Funds Management (S), Ascendas REIT’s manager, said in a filing to SGX after the market close on Thursday.

That was due mainly to the acquisitions of: 100 Wickham Street and 108 Wickham Street in Brisbane, Australia, in the second half of the previous fiscal year; 169-177 Australis Drive in Melbourne, Australia, in June 2018; 12 logistics properties in the U.K. in August 2018; and Cargo Business Park in Melbourne in September 2018. And also the completion of redevelopment works at 20 Tuas Avenue 1 in Singapore since April 2018. However, that was partially offset by lower occupancy in the Singapore portfolio, it said.

The distribution per unit (DPU) for the fiscal second quarter was 3.887 Singapore cents, down 4.2 percent on-year from 4.059 Singapore cents in the year-ago quarter.

It fell on a combination of lower contributions from Singapore, higher interest expense, raising equity of S$450 million in anticipation of buying a second portfolio of U.K. properties and a build-to-suit development in Singapore, the REIT manager said.

Occupancy in the Singapore portfolio fell to 87.1 percent, from 90.1 percent in the year-ago quarter and 88.1 percent in the previous quarter, mainly on non-renewals at logistics properties 40 Penjuru Lane and 9 Changi South Street 3, it said.

Australian occupancy was at 98.5 percent at 30 September, down from 98.7 percent in the year-ago quarter and 98.6 percent in the previous quarter, it said.

Missed forecast

That missed forecasts from Daiwa for net property income of S$164.8 million, revenue of S$220.9 million and DPU of 3.97 Singapore cents.

Property operating expenses rose 7.1 percent in the quarter to S$59.23 million, partly due to new acquisitions in the quarter and on the reversal of some accrued property operating expenses in the year-ago quarter which were no longer required, the REIT manager said.

For the fiscal first half, Ascendas REIT reported net property income rose 1.3 percent on-year to S$318.11 million, gross revenue rose 1.3 percent on-year to S$434.69 million and DPU fell 2.7 percent on-year to 7.889 Singapore cents.

Outlook

William Tay, CEO and executive director of the REIT manager, said the REIT had a “very active quarter” and made progress on its U.K. expansion.

“Besides Singapore, our long term strategy is to build up our portfolio in Australia, the U.K. and also into Europe,” he said.

But the REIT also pointed to some global concerns.

“Global economic growth moderated in the first half of 2018. Potential escalation of trade tensions between the United States and China remains a key threat to the global outlook,” it said in the statement.

It said that in Singapore, despite expectations of a gradual recovery in the industrial property market, businesses were cautious amid trade tension and were reviewing their business space commitments.

In Australia, economic strength has been positive for demand in the logistics and office sectors, with higher occupancy levels in most major markets, the REIT manager said, adding it would continue to look for acquisitions there.

In the U.K., the company said its portfolio tenants’ logistics businesses were domestically focused, which should help the REIT overcome any potential Brexit impact.

Ascendas REIT has a portfolio of 98 properties in Singapore, 35 in Australia and 12 in the U.K., as of 30 September.

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