CapitaLand Ascendas REIT (SGX: A17U), also known as CLAR, is Singapore’s first and largest listed business space and industrial real estate investment trust (REIT).
It owns and manages a portfolio of business space and industrial properties in Singapore, Australia, the US, the UK and Europe.
As of 30 June 2023, it owns 230 properties across three key segments, namely Business Space and Life Science, Logistics and Industrial and Data Centres.
With a solid track record of new acquisitions contributing significantly to revenue and net property income (NPI), CLAR is well-positioned to weather different market conditions, making it an attractive investment option.
Below are three reasons to consider investing in CLAR.
1. Strong Financial Performance and Diversification
CLAR reported H1 2023 revenue of S$718.1m, showing a 7.7% YoY increase, primarily due to contributions from new acquisitions made in 2022 and 1H23.
Despite higher interest costs, the NPI showed a healthy increase of 6.7% YoY to S$508.8m.
Furthermore, with a diversified geographical footprint, CLAR is not overly reliant on any single market, reducing risk and ensuring a steady flow of revenue from different regions.
The variety in property types, including logistics, life sciences spaces, business spaces, and data centres, adds another layer of diversification, cushioning the REIT against sector-specific downturns.
2. Positive Rental Reversions and High Occupancy Rates
CLAR has demonstrated strong positive rental reversions, notably 18% and 14.2% increases in Q2 and H1 2023, with the Singapore logistics and life sciences segments being the best performers.
This suggests an ability to negotiate higher rents upon lease renewals, which can contribute to income growth.
The overall portfolio occupancy stood at a commendable 94.4% at the end of 1H23, with Australia, the UK and Europe showing remarkable stability at 99.5%.
Even as the US portfolio experienced a slight dip, it still maintained a healthy occupancy of 92.1%.
This high occupancy rate across the portfolio is indicative of robust demand for CLAR’s properties, which can translate to reliable income.
3. Healthy Balance Sheet and AEIs
CLAR boasts a healthy balance sheet with an aggregate leverage of 36.7% at the end of H1 2023 and a stable interest cost of 3.3%.
The adjusted interest coverage ratio remained solid at 4.1 times, reflecting the REIT’s ability to cover its interest expenses comfortably.
Additionally, CLAR has ongoing Asset Enhancement Initiatives (AEIs) and redevelopment projects worth S$776.5 million, primarily located in Singapore.
The progressive completion of these projects from Q4 2024 to Q2 2026 is poised to drive portfolio returns in the medium term further, thereby enhancing the value proposition for investors.
Conclusion
In conclusion, CapitaLand Ascendas REIT presents an appealing investment opportunity due to its strong financial performance, diverse and resilient portfolio, positive rental reversions, high occupancy rates, and robust balance sheet. Moreover, the ongoing asset enhancement initiatives are likely to contribute to sustained growth in the medium term. However, like all investments, it is essential for potential investors to consider the associated risks, including the impact of a protracted economic downturn and the high-interest-rate environment on rental pricing and acquisition growth opportunities.
Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.
