a-iTrust's 1Q FY2010 total property income up 4%

Company incurred S$ 0.7mln realised loss behind higher tax expense as tax rates in India increase.

Ascendas Property Fund Trustee Pte Ltd, the Trustee-Manager of Ascendas India Trust (a-iTrust), reported the results of a-iTrust for the first quarter (ended 30 June 2010) of the financial year 2010/11 (1Q FY2010/11).

Total property income for 1Q FY2010/11 was S$30.9 million, an increase of 4% from the corresponding quarter last year. Net property income was S$18.9 million or 3% higher, according to an a-iTrust report.

Chief Executive Officer of the Trustee-Manager, Mr Jonathan Yap said, “Property income this quarter grew year-on-year, despite total income-producing space in the portfolio remaining stable over this period. We had a healthy level of leasing activities in the first quarter, when 230,000 sq ft worth of leases were finalised, exceeding the 190,000 sq. ft of space which expired during this period. Such efforts had ensured that portfolio occupancy rate remain high, at 97%.

Upcoming addition of 1.2 million sq ft of new space later this year is expected to further contribute to the expansion of the portfolio income base. The space addition is from Park Square (a retail mall in International Tech Park Park Bangalore (ITPB) and Zenith (an IT Multi-tenanted Building (MTB) in International Tech Park Chennai (ITPC), for which pre-leasing is in progress.”

Distributable income for the quarter was S$12.7 million, registering a decrease of 19% over the same period last year. This was mainly due to realised gains in 1Q last year of S$ 4.1 million, from settlement of forward foreign exchange contracts. In contrast, there was a realised loss of S$ 0.7 million in 1Q FY2010/11. The forward contracts were entered into to hedge repatriation of distributable income, as part of a-iTrust’s policy to mitigate the risk of unexpected exchange rate changes at the time of repatriation, which could adversely affect distribution to Unitholders.

The decrease in distributable income was also partly the result of higher tax expense, due to increases in tax rates in India applicable to the reporting period.

As a result, DPU for the quarter amounted to 1.66 Singapore cents, down 19% from the same quarter last year. This represents an annualised yield of 7.1% and 6.7% respectively over the closing prices of S$ 0.94 and S$ 0.995 per unit on 30 June 2010 and 22 July 2010. Distribution is semi-annual, hence the first quarter’s distribution will be made with next quarter’s.

Gearing remained low at 21% as at 30 June 2010. Net asset value attributable to Unit holders was S$0.85 per unit.

Mr Yap added, “No additional debt is required for the ongoing developments, including the MTB within ITPB’s Special Economic Zone (SEZ) scheduled for completion in mid 2011, as they have been fully funded. Therefore, our current gearing level of 21% leaves significant room for the continuous implementation of our growth strategy, whether through development or acquisition.”

A Well-Diversified Portfolio with High Occupancy
a-iTrust’s portfolio of 4.8 million sq ft of completed space is fairly evenly distributed among Bangalore, Chennai and Hyderabad.

a-iTrust’s properties are today home to a total working population of 57,000 people from 247 corporate tenants operating in various IT sub-sectors such as software development, business process off-shoring, research and development, and data centres. While their operations in our properties are IT-related, our tenants’ underlying businesses are diverse, such as pharmaceuticals and manufacturing. As at 30 June
2010, the largest tenant contributed about 4.6% of the portfolio base rent, while the top 10 tenants collectively accounted for about 31% of portfolio base rent, further demonstrating the low client concentration and high income stability.

Occupancy rate for the portfolio as at 30 June 2010 was 97%. This exceeds market occupancy rates of 63% to 92% for the micro-markets in which the portfolio’s properties are located.

92% of our tenants are multi-national corporations. Our tenants appreciate the “Ascendas Advantage” that comes with the portfolio being managed by the Ascendas Group. By that, we refer to quality space, reliable solution and international business lifestyle. Hence, in addition to ensuring that the space continues to meet our customers’ requirements, a host of services and amenities are provided to develop a sense of community belonging within each park. For instance, 14 events were organised during the quarter for the users at our parks, such as the ITPB Ethnic Day held in April 2010 and the Eco Drive Week held in June 2010 at all parks.

Three-Pronged Acquisition Strategy
As at 30 June 2010, a-iTrust’s total borrowing stood at S$ 197.1 million, reflecting a 21% gearing (loan-to-value). The low gearing allows a-iTrust to fund growth via development or acquisition using debt initially. At the current gearing level, the trust has an additional debt capacity of S$ 120 million or S$ 350 million before its gearing reaches 35% or 60% (loan to value) respectively.

a-iTrust enjoys a Right of First Refusal (“ROFR”) granted by Ascendas Land International Pte Ltd (“ALI”) to acquire its substantially income-producing business space. ALI owns CyberVale, an IT SEZ in Chennai, and under the ROFR, 535,000 sq ft of income-producing space and 4.4 acres of land4
could be offered to a-iTrust for acquisition.

a-iTrust also has a ROFR from Ascendas India Development Trust (“AIDT”). With S$ 500 million of committed equity, AIDT’s target investment size is S$ 1 billion. AIDT has invested in development projects with about 10 million sq ft of business space development potential in India. This ROFR represents a significant acquisition pipeline of quality space for a-iTrust in the mid-term, as AIDT progressively develop the land.

In addition to acquiring via ROFR, the Trustee-manager seeks to also acquire from the market.

Portfolio to Grow through Organic Growth
a-iTrust has proposed to develop about 1.7 million sq ft of new space on land it owns within its portfolio. About 1.2 million sq ft are due for completion in 2010, being Park Square (450,000-sq ft retail mall in ITPB) and Zenith (742,000-sq ft IT MTB in ITPC). A third building, which is a 535,000-sq ft MTB in ITPB’s SEZ, is expected to complete in 2011. When completed, the proposed 1.7 million sq ft of space will increase the current 4.8 million sq ft of income-producing space by about 35%.

In addition to the above-mentioned 1.7 million sq ft of proposed space, a further 2.5 million sq ft of space could be developed within the portfolio, which is largely within the SEZ in ITPB.

Looking Forward
The India economy grew impressively by 7.4% in FY2009/10, and the India Government had estimated this to accelerate to around 8.5% in FY2010/11. We are focused on positioning the trust to further create value for Unitholders by leveraging on India’s growth.

The Trustee-Manager will continue to focus on growing the operating earnings of its assets by actively managing the portfolio, optimising its capital structure, and further growing the portfolio through developing the land it owns and pursuing yield accretive acquisitions.