A-Reit targets $5b portfolio size by 2010

Source : Business Times - 01 Jul 2008

Unitholders approve issuing new units, convertibles to add to financing options

ASCENDAS Real Estate Investment Trust (A-Reit) is looking to invest some $500 million in industrial properties and business space each year to reach its target portfolio size of $5 billion by the end of 2010.

A-Reit will expand its portfolio through development projects and yield-accretive acquisitions.

The annual investment target is achievable, said Tan Ser Ping, CEO of A-Reit manager Ascendas Funds Management (S) Ltd. A-Reit’s latest investment has been the $246.8 million purchase of 31 International Business Park, Creative Technology’s headquarters building in Jurong East.

A-Reit unitholders yesterday approved a general mandate to issue new units or convertible securities in the financial year ending March 31, 2009. ‘This mandate would provide A-Reit with the necessary financing flexibility to respond to market opportunities,’ said Mr Tan.

Nevertheless, ‘the manager does not expect any immediate need to utilise the mandate to either issue new equity or debt securities such as convertible bonds’, he said.

To diversify funding sources, A-Reit is also putting in place a medium-term note issuance programme, Mr Tan told BT. This should be ready by the end of the third quarter or early fourth quarter.

With a gearing level of around 38 per cent in March, A-Reit also has debt capacity for near-term investments, Mr Tan said. ‘Access to capital is more difficult now, but … the better Reits, including A-Reit, have still got strong support from banks. Our existing banking lines are intact.’

Mr Tan believes that rental growth for business and science park properties and hi-tech industrial properties will remain healthy in A-Reit’s current financial year - rents for business and science park properties, for instance, are likely to grow by around 15 per cent.

However, he points out that uncertainty in the global economic environment will continue to cast a shadow over local conditions.

A-Reit units fell four cents yesterday to close at $2.21. CLSA issued a ‘buy’ call on the counter last week.