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Ascendas Reit Q1 DPU edged up to 4.005 S cents on enlarged unit base

WHILE Ascendas Reit got a boost from newly acquired properties and a different accounting standard for property operating expenses in its first quarter, the business space and industrial landlord also faced an enlarged unit base.

The latter factor led distribution per unit (DPU) to rise just marginally to 4.005 Singapore cents from 4.002 Singapore cents year-on-year, though Q1 total amount available for distribution grew 6.3 per cent to S$124.7 million.

Gross revenue in its first quarter ended June 30 rose 6.1 per cent to S$229.7 million from the previous year, lifted mostly by new acquisitions in the United Kingdom and Australia during the previous financial year

Net property income (NPI) grew 11.5 per cent to S$177.5 million from the year-ago period, as land rent of S$8.2 million was excluded from property operating expenses following the adoption of new financial reporting standards. Excluding the effects from that switch in standards, NPI would have risen by 6.3 per cent year-on-year.

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Finance costs also rose 40.9 per cent to S$41 million, whole foreign exchange loss narrowed by 63.9 per cent to S$7.7 million. Net change in fair value of financial derivatives rose by 72.5 per cent to S$26.4 million.

As at June 30, Ascendas Reit's investment properties under management totalled S$11.1 billion, comprising 98 properties in Singapore, 35 properties in Australia and 38 properties in the United Kingdom.

Portfolio weighted average lease to expiry (WALE) stood at 4.1 years as at June 30. Total occupancy was at 91.1 per cent, up slightly from end June 2018's 90.5 per cent. Aggregate leverage stood at 37.2 per cent and the Reit achieved average positive rental reversion of 2.7 per cent for leases in multi-tenant buildings renewed during the quarter.

The manager said in a statement: "Despite the uncertainty in the global economic outlook, the portfolio performance in the current three markets remains stable. The manager will continue with our multi-pronged strategy to sustain the performance and complement it with disciplined and accretive investments in Singapore and other developed markets."

It noted that leasing activity for the logistics sector has slowed in the first quarter of 2019 in the United Kingdom stemming from Brexit uncertainty. But it also believes that "the sector remains fundamentally resilient as rents are expected to remain firm amidst supply constraints".

The manager added: "Strong attributes such as the long weighted average lease to expiry of 9.1 years (for the UK business) and the domestic nature of the tenants’ logistics business will stand Ascendas Reit in good stead to overcome any potential impact arising from Brexit."

Meanwhile in Singapore, it believes rental rates will remain subdued but the business and science park segment continues to be a key growth area.

Ascendas Reit units ended S$0.02 or 0.7 per cent up at S$3.05 on Monday.