Investing in Ascendas REIT

ascendas-reit-investment-singapore

Strong Corporate Parent

Ascendas REIT (AREIT) is the first and largest industrial SREIT to be listed in Singapore. AREIT has a strong corporate parent in the form of government-linked Ascendas-Singbridge, which provides AREIT with a good pipeline of acquisition assets. Thus, AREIT has been very active in asset acquisitions and has grown from its original portfolio of eight industrial properties to current 132 industrial properties.

Light Industrial Buildings

While AREIT’s property portfolio originally included Singapore, Australia and China industrial properties, it had since divested and taken profit on all of its China industrial properties. In terms of industrial property types, AREIT’s portfolio currently consists of light industrial buildings, logistics space, business & science parks, hi-specification industrial space and integrated development amenities & retail space. Business & science parks and hi-specification industrial space can also be partly used as office space (subjected to government’s regulations), thus they tend to fetch relatively higher rental rates. In terms of asset enhancement initiatives (AEIs), AREIT is fairly active in driving small-scale AEIs to enhance its property value.

Cyclical Industrial Rental Income

AREIT’s industrial rental income tends to be fairly cyclical as it depends primarily on industrial production growth. AREIT’s properties are also mainly leased out as single-user properties (with one master lease) or multi-tenanted properties (with multiple leases). Single-user properties tend to have higher occupancy rates but lower rental rates (versus multi-tenanted properties). Lastly, industrial properties in Singapore tends to have shorter land leases (between 20 years to 99 years), thus industrial SREITs tend to trade at a discount (and offer a higher dividend yield) than other types of SREITs.