Excerpts from CGS International report
CapitaLand Ascendas REIT (SGX: A17U)
- Portfolio occupancy slipped 0.9% qoq even as CapitaLand Ascendas REIT (CLAR) continues to see average +16.9% rental reversions in 1Q24.
- CLAR has 9.3% of portfolio leases to be renewed for the rest of FY24F, mainly in Singapore, Australia and the US.
Reiterate Add rating, with an unchanged TP of S$3.06.
1Q24 business update highlights
CapitaLand Ascendas REIT (CLAR) reported 1Q24 portfolio occupancy of 93.3%, -0.9% pt from end-FY23, with lower take-up across its portfolio.
Australia, US, UK/Europe reported a 0.9%/2.1%/1.8% drop in occupancy qoq due to the lease expiry of a single tenant property in Australia, tenant movement in Raleigh and Kansas City in the US, and expiry of a single-tenant data centre lease at Welwyn Garden City in the UK.
Portfolio rental reversion averaged +16.9% in 1Q24. Aggregate leverage ticked up qoq to 38.3% (from 37.9% in 4Q23), while average funding cost came in at 3.8% as at end-1Q24.
An estimated 82.6% of CLAR’s total debt is on fixed rates, as at end-1Q24.
Singapore portfolio rental reversions at a healthy +16%
While Singapore occupancy was down qoq, it remained stable at 92.3% vs. 1Q23. CLAR achieved +16% rent reversion in 1Q24 in Singapore, with leasing demand coming from government/NGOs/non-profit organisations (NPOs), engineering and lifestyle sectors.
Singapore logistics sector continued to show the strongest reversions at +62%, while industrial and data centre segments posted +11.4% upside on lease renewals.
Management maintained its guidance for FY24F rental reversion to be in the positive mid-single-digit range. CLAR has a remaining 11.2% of leases to be re-contracted for the remainder of FY24F.
Take-up for overseas portfolio slipped qoq
US portfolio saw a dip in occupancy, from 90.4% in 4Q23 to 89.5% in 1Q24, as the improvement in Portland was offset by lower take-up for a business space in Raleigh and a logistics property in Kansas City.
That said, the US portfolio continued to see +28.7% rental reversion for its logistics portfolio. CLAR has a remaining 11% of its US portfolio
leases due to be renewed in FY24F, mainly from business and life sciences space in Raleigh and San Francisco.
Occupancy in Australia fell to 96.5% in 1Q24 (from 98.7% in 4Q23) due to non-renewal of a lease expiry of a single-tenant logistics property in Sydney.
CLAR has a remaining 17.7% of leases in AU to be renewed for FY24F, coming mainly from Sydney logistics properties. Occupancy for the UK/Europe portfolio dipped to 97.7% in 1Q24 (from 99.5% in 4Q23) due to expiry of a data centre lease in the UK.
The property in Welwyn Garden City is slated for redevelopment. Excluding this, overall occupancy would have remained stable qoq at 99.5% in 1Q24.
Valuation/Recommendation
Reiterate Add rating. We keep our FY24-26F DPU estimates unchanged post-update and maintain our DDMbased TP at S$3.06. We continue to like CLAR for its diversified and resilient portfolio and healthy balance sheet.
Potential catalysts include faster-than-expected global recovery and accretive new acquisitions. Downside risks include a protracted economic downturn that could adversely impact its ability to price rents for positive reversions.
You can find the full report here and the company website here.
