To The Moon

$ASCENDAS REAL ESTATE INV TRUST(A17U.SI)$ (+) Higher revenues from acquisitions and completed developments 1H22 revenues increased 13.7% y-o-y to S$666.5m due mainly to contributions from acquisitions in the past year 11 data centres in Europe (March 2021) 75% interest in Galaxis (June 2021) 11 logistics properties in Kansas City (November 2021) 7 logistics properties in Chicago (June 2022) Completion of Grab HQ (July 2021) Several other development completions in Singapore and Australia Higher revenues were partially offset by divestments 1314 Ferntree Gully Road, Melbourne (June 2021) 82 Noosa Street and 62 Stradbroke Street, Brisbane (July 2021) 1H22 NPI increased 7.0% y-o-y to S$476.9m in tandem with higher revenues Partially offset by higher utilities expenses from Singapore properties Utilities made up c.23% of OPEX, and c.17% is recoverable from tenants NPI margins fell from c.74.3% to c.70.3% y-o-y mainly due to higher utilities cost for Singapore properties Expect margins to remain close to current levels as utility contracts have been locked in until December 2022 (+) 1H22 DPU of 7.873 Scts in line with projections Announced DPU of 7.873 Scts. for 1H22; in line with projections Forms more than 49% of our FY22 DPU estimates 2H22 DPU expected to inch up due to full half-year contribution from the 7 logistics properties in Chicago, and higher income contribution from UBIX (+) 13.2% positive rental reversions in 2Q22 Strong positive rental reversions of 13.2% in 2Q22; positive rental reversions across all markets Singapore: 13.2% - mainly driven by Business Space and Life Sciences, and Logistics Australia: 15.2% - driven by Logistics US: 15.3% - driven by Business Space UK: 11.7% - driven by data centres Expect FY22 average reversions to be in the positive mid-single-digit range Improvement from previous quarter’s guidance of a positive low single-digit reversion for the year Still seeing strong demand and expansion enquiries from tenants from a myriad of sectors Biomedical, R&D, Life Sciences, and logistics (+) Portfolio occupancy improved further to 94.0% Higher occupancies across Singapore, the US and UK/Europe Singapore portfolio occupancy increased from 90.0% to 91.9% q-o-q Mainly due to higher occupancies at 1 Changi South Lane and UBIX (51.5% just 6 months after TOP) c.10.2% of portfolio GRI is due for renewal for the rest of FY22 Expect to maintain high occupancy rates and continued positive rental reversions Only segment expected to face some headwinds is the suburban office space due to structural shift to more work-from-home flexibility Some tenants expected to return some space or consolidate their office space requirements Singapore: International Business Park and Changi Business Park US: suburban offices in San Francisco (+/-) Capital management metrics maintained, but could see financing costs edge up All-in financing costs maintained at 2.1% as bulk of expiring loans were refinanced early 80% of loans are hedged to fixed rates Rising interest rates could potentially lead to a 10-20 bps increase in all-in financing costs by year-end Gearing inched up to 36.7%, mainly due to acquisitions in Chicago (+) S$566m worth of ongoing projects to drive income growth In addition to higher contribution expected from UBIX that recently reached TOP, a further S$566m of ongoing projects are expected to drive revenues growth in the next two years Major development/redevelopment projects include MQX4 in Sydney (1Q23), and 1 Science Park Drive redevelopment in Singapore (2Q25) Just announced AEI works at The Alpha in Singapore Science Park 2 AEI to refurbish the property and add new facilities Still has unutilised GFA at the property, but will consider adding on an annex building on a vacant plot of land, rather than redeveloping the whole property. I expect AREIT’s overall portfolio to record organic earnings growth in the coming quarters supported by positive rental reversions and higher occupancy rates. My estimates assume that organic growth will be more than sufficient to offset some of the potential headwinds in the suburban office segment. @TigerStars DYODD