CapitaLand Ascendas Reit H2 DPU rises 4.3% to S$0.07925 on higher revenue

CAPITALAND Ascendas Reit (Clar) on Thursday (Feb 2) posted a distribution per unit (DPU) of S$0.07925 for the second half ended Dec 31, 2022, up 4.3 per cent from S$0.07598 in the year-ago period.

The increase was driven by strong performance on the operational front, with portfolio occupancy hitting a 10-year high of 94.6 per cent.

The real estate investment trust (Reit) manager noted that the portfolio achieved positive average rent reversion of 8 per cent for leases renewed in FY2022, improving from 4.5 per cent in the previous year.

The average positive rental reversion for leases signed in Q4 also stood at 8 per cent, compared with 5.4 per cent in the preceding quarter.

The Reit manager guided that rental reversion for FY2023 is expected to be in the “positive mid single-digit range”.

“Logistics, in terms of demand, continues to be very strong. In fact, the outlook for logistics across the four markets that we have is very positive,” said William Tay, chief executive officer of the manager, at a briefing accompanying Clar’s results announcement.

“We also expect strong rental reversion in the logistics space (going into FY2023),” he added.

Gross revenue was up 7.1 per cent to S$686.1 million for the half year, from S$640.5 million a year earlier.

This was mainly attributable to contributions from a built-to-suit development in Singapore, as well as newly acquired properties that include data centres in Europe and logistics properties in the US.

The improved occupancy in certain Singapore investment properties also contributed to the higher revenue, the Reit manager added.

Net property income (NPI) grew 3.5 per cent on the year to S$491.8 million for the half year, from S$475.2 million a year earlier.

Total amount available for distribution rose 4.5 per cent year on year to S$333.2 million, from S$319 million.

A distribution of S$0.07925 per unit for the period Jul 1 to Dec 31, 2022 will be paid on Mar 7, following the record date of Feb 10.

For the full year, gross revenue was up 10.3 per cent to S$1.4 billion. NPI was up 5.2 per cent to S$968.8 million, while the total amount available for distribution was up 5.4 per cent to S$663.9 million.

The full-year DPU rose 3.5 per cent to S$0.15798. This was due to the increase in NPI and the absence of the manager’s performance fee, which was partially offset by an increase in borrowing costs, Clar’s manager said.

As of Dec 31, 2022, Clar’s S$16.4 billion portfolio had a customer base of more than 1,720 tenants across Singapore, the US, Australia, and the United Kingdom/Europe.

The portfolio’s weighted average lease expiry (Wale) stood at 3.8 years. About a fifth (21 per cent) of Clar’s gross rental income will be due for renewal in FY2023.

The Reit manager added that it will continue to undertake redevelopment and asset enhancement initiatives (AEIs) to reposition and upgrade its properties.

“We realise that the flight to quality is very key, especially in this environment,” Tay said. “We will not hold back on any AEIs or redevelopment. In fact, the team has been working very hard to look at opportunities for us to redevelop.”

For example, Tay said the S$38.2 million redevelopment of the Ubix industrial property in Singapore, which was completed in January 2022, has enabled the Reit to secure a higher base rent.

“The rental that we have achieved is very strong,” Tay said. “It’s probably about 20 per cent higher than our underwriting.”

Clar currently has five ongoing development and AEI projects worth S$617.4 million, which are expected to complete between Q2 2023 and Q2 2025.

Clar’s manager noted that it will continue to face challenges from rising interest rates, inflation and global economic uncertainties, which “may have some impact on tenants’ businesses as well as on Clar’s operating costs”.

“We will continue to leverage on our strong financial position, operational capabilities and diversified portfolio to safeguard and expand our business, while adopting a cautious approach amid the ongoing uncertainties in the global economy and the interest-rate environment,” Tay said.

Units of Clar closed at S$2.94 on Thursday, up S$0.04 or 1.4 per cent, before the release of the results.