S&P affirms AIMS APAC REIT’s credit rating

AIMS APAC REIT, or AA REIT, industrial warehouse at 20 Gul WayAIMS APAC REIT, or AA REIT, industrial warehouse at 20 Gul Way

S&P Global Ratings affirmed AIMS APAC REIT’s issue credit rating at BBB-minus, with a stable outlook, pointing to a “good track record” on asset quality and higher-than-industry-average occupancy rates.

“We believe AA REIT’s overall portfolio occupancy rate will remain above 90 percnet. The REIT’s consistent asset enhancement initiatives (AEIs) have helped maintain the quality of its various assets, which is reflected in its consistently high occupancy rates,” S&P said in a statement Thursday.

But the ratings agency added that the REIT’s asset concentration exacerbates its exposure to the cyclical industrial property market.

“The several cuts made to Singapore’s official growth forecasts in 2019 will dampen business sentiment, in our view. We believe this will limit
the upside on rents,” S&P said. “The top three contributing assets accounted for a substantial one-third of the REIT’s total revenue in the fiscal year ended March 31, 2019. This increases the risk that a decline or temporary disruption in the REIT’s larger assets will have a substantial impact on its credit metrics.”

S&P forecast the REIT’s topline growth would average 1 percent to 2 percent annually in fiscal 2020 and 2021.

In a filing to SGX Friday, Koh Wee Lih, CEO of the REIT’s manager, said the reaffirmation of the rating “reflects the strength of our strategy which is focused on active asset and lease management, portfolio growth through strategic acquisitions and development initiatives, and a prudent approach to capital and risk management.”

In S&P’s ratings scale, BBB is investment grade, indicating “adequate” ability to meet financial commitments, but that the issuer may be more subject to adverse economic conditions. The minus indicates the issuer is at the lower end of its peers in BBB category.

AA REIT has 25 properties in Singapore and two in Australia.

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