ASCENDAS Reit : A17U 0% (A-Reit) reported positive rental reversion of 4.6 per cent for lease renewals in its first quarter ended Mar 31, with its portfolio occupancy standing at 92.6 per cent, down from 93.2 per cent in the last quarter. Rental reversion for FY2022 is expected to be in the "positive low single-digit range" in view of current market uncertainties, the manager of the real estate investment trust (Reit) said in a quarterly business update on Wednesday (May 4). The manager also noted that 79.1 per cent of the Reit’s borrowings are on fixed rates with an average term of 3.7 years, though it warned that distribution per unit (DPU) could decline by 0.06 to 0.29 cent if interest rates went up by 20 to 100 basis points.

Occupancy in Singapore held steady at 90 per cent for the first quarter, it said. It noted that the Reit's multi-asset portfolio in Singapore worth S$10 billion comprises properties in the business space and life sciences, logistics, and industrial and data centres segments, allowing it "to serve a wide range of customers" across industries. In addition, the recent completion of several asset enhancement initiatives and redevelopment as part of the Reit’s asset rejuvenation plan are expected to generate higher returns for it, the Reit manager added.

On the other hand, occupancy in Australia fell to 96.8 per cent for the first quarter due to 2 non-renewals upon lease expiry, compared with 99.2 per cent as at end-December 2021. The Australian portfolio worth S$2.4 billion provides a "stable income stream" for the Reit, with a Weighted Average Lease Expiry or WALE of 3.2 years, the manager said. 

It also noted the completion of 2 new logistics properties in Sydney and Brisbane in Q1 2022, which it believes will "contribute positively" to the portfolio, taking into account 100 per cent occupancy rates, alongside the completion of a new suburban office in Sydney in Q4 2022. Occupancy in the United States remained "stable" at 94 per cent from the previous quarter. Leasing activity for some business space properties is expected to remain slow, "as companies continue to re-evaluate their real estate footprint". 

Nevertheless, the performance of the Reit’s S$2.3 billion US portfolio is "underpinned by a long WALE of 4.3 years", the Reit manager said. In the UK and Europe, occupancy remained unchanged at 96.7 per cent from the previous quarter. The Reit’s portfolio of logistics properties and data centres - worth S$1.8 billion in those markets - has a "long WALE of 5.5 years", and is poised to benefit from the "strong e-commerce adoption and digitalisation of activities", the manager noted.

As at Mar 31, 2022, the Reit's aggregate leverage stood at 36.8 per cent, interest coverage ratio was 5.7 times and weighted average all-in debt cost was 2.1 per cent.

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The manager highlighted that it is paying "close attention" to supply chain disruptions, rising energy costs and interest rates and other inflationary pressures that have affected trade, commodity and financial markets, which may have "some impact" on the Reit’s tenants' businesses and on the Reit manager's operating costs. "Overall, we are confident that our strong experience, diversified portfolio in developed markets and A3 Moody’s credit rating will help us to stay ahead of the curve, withstand economic shocks and continue to grow in a healthy manner," it said. Units of Ascendas Reit ended Wednesday 1.4 per cent or S$0.04 lower at S$2.82, before the business update release.