What’s next for Ascendas REIT shares?

$ASCENDAS REAL ESTATE INV TRUST(A17U.SI)$ recent updates:

• The Singapore property group has announced the proposed acquisition of seven logistics properties located across Chicago, US.
• The stock has an average price target of S$3.31 and ‘outperform’ rating.

Ascendas REIT stock price: what’s the latest?

Ascendas Real Estate Investment Trust (AREIT) share price fell by 1.1% this week, following a new announcement that it is planning to acquire seven Chicago-based logistics properties for S$133.2 million.

The real estate group’s shares were down nearly 5% in the last month, amid concerns of sharp interest rate hikes and the global economic impact of China’s ongoing zero-Covid measures.

The blue-chip counter, which has an average price target of S$3.307 and rating of ‘outperform’ (based on SGX StockFacts data) is also down 7% year-to-date.

OCBC analysts provided the latest price estimate and thesis on AREIT. They lowered their price target on the stock to S$3.43 from S$3.84 previously, but maintained a ‘buy’ rating.

What are the details of the proposed acquisitions?

On Monday (09 May 2022), Ascendas Funds Management (S) Limited, the manager of AREIT, announced the proposed acquisition of a portfolio of seven logistics properties located across Chicago, Illinois, US, from BREIT Industrial HS Property Owner LLC, BREIT Industrial Canyon IL1M03 LLC, BCORE Jupiter NEMW 1 LLC and Icon Pac Owner Pool 4 Northeast/Midwest, LLC, third-party vendors.

The seven target properties are located on freehold lands, possessing a total net lettable area of 132,344 square metres. The properties are located in infill locations across six growing industrial submarkets, namely, O’Hare, Central DuPage, South Cook County, I-88 Corridor, Southwest Cook County and I-39 Corridor.

The proposed acquisition is ‘expected to increase and diversify AREIT’s exposure to logistics properties in USA and across its portfolio’, the manager said in a press release.

On a pro forma basis, the proportion of Ascendas Reit’s US logistics properties will increase to 14.6% (S$0.3 billion) from 9.4% (S$0.2 billion).

On a total portfolio basis, the proportion of Ascendas Reit’s logistics properties will increase to 25% (S$4.2 billion) of total investment properties of S$16.5 billion (from S$4 billion or 24% of total investment properties of S$16.4 billion).

The estimated net property income yield for the first year post acquisition will amount to approximately 5.3% and 5.1% pre-transaction costs and post-transaction costs respectively.

William Tay, Executive Director and Chief Executive Officer of the Manager said:

‘Following our successful entry into the USA logistics market in November 2021, we are pleased to acquire another portfolio comprising seven logistics properties in Chicago, the largest industrial market in the country based on existing space. This portfolio comes with a long weighted average lease expiry of 5 years and is 100% occupied by 12 tenants from a diverse range of industries including logistics service providers, engineering companies and a food distributor.’