Ascendas REIT lags in portfolio occupancy

Its multi-tenanted buildings portfolio was only 90% occupied as of end-FY12.

According to Nomura, AREIT is not featured in the top-three REITs in terms of portfolio occupancy although it has one of the strongest balance sheets amongst our covered REITs (debt maturity was lengthened to 4 years in the past year).

Here's more from Nomura:

This is because its multi-tenanted buildings (MTBs) portfolio was only 90% occupied as of end-FY12, with its Fusionopolis and Shanghai projects scheduled for completion in the next two FYs and seeking tenants. The NPI margin could also be vulnerable, as utilities expenses increased y-y to 8% of revenue. The new property and lease management agreements also result in greater alignment of interest between the property manager and unitholders, despite minimal savings of SGD1.5mn/year, on our estimates.

Catalyst: Potential for more asset divestment may be priced
The recent sale of Goldin Logistic Hub was AREIT’s first asset divestment and there is potential for the manager to divest more of its assets at attractive valuations, capitalising on investors’ current demand for investment-grade industrial properties. That said, with the stock already trading at a 10% premium to its book value, we believe the potential may have already been priced to some extent.

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