Looking back on FY14/15, what do you consider as some
of A-REIT’s achievements?
A significant initiative that the Manager of A-REIT undertook in
favour of Unitholders was to revise the basis for the computation
of Base Fee and to waive its Performance Fee to ensure that
Unitholders receive the threshold levels of DPU growth. Hence
in FY14/15, Unitholders will receive the full 2.5% of DPU growth
and the Manager would not earn any performance fees.
Improving the portfolio occupancy level was another achievement
for us. During the year, A-REIT encountered a few non-renewals
in some Changi Business Park properties and single-tenant
buildings. Our operations team put in extra effort to promote and
attract new customers such as UBS, Huawei, Euroimmun, Ceva
Logistics and Hellmann Worldwide Logistics. By September, the
slide in portfolio occupancy to 85.6% was arrested and has since
been lifted to 87.7% as at 31 March 2015, despite an increase in
portfolio size by approximately 110,000 sqm.
A-REIT’s total assets have reached S$8.2 billion with the
acquisition of three new properties (Hyflux Innovation
Centre, Aperia and The Kendall) in Singapore. We consider
the acquisition of Aperia as the cornerstone of our growth
strategy into the integrated mixed-use development space.
Within eight months of obtaining the temporary occupation
permit (“TOP”), we brought up the occupancy rate of Aperia
to about 80%, with renowned multinationals in the likes
of Audi, Intel and McDonald’s. We are very happy with the
leasing progress at Aperia.
We are proud of our strong corporate governance track
record. A-REIT was awarded the Most Transparent Company
Award in the REITs category by Securities Investors Association
(Singapore) for the 10
th
year.
In June 2014, A-REIT was included in the Straits Times Index as
one of the 30 constituents, an important milestone since our IPO
in 2002. We have grown from eight properties and a market
capitalisation of less than S$500 million to 107 properties and a
market capitalisation of S$6.2 billion at the end of March 2015.
How would the new acquisitions add-value to A-REIT’s
business?
It is A-REIT’s focus to own quality industrial properties and
scale up exposure in the Business & Science Park, Integrated
Development and High-Specifications segments. The three new
acquisitions, Aperia, The Kendall and Hyflux Innovation Centre
will boost the share of these segments to 64% of A-REIT’s
portfolio. Properties in these segments are aligned to serve the
needs of the Singapore economy into the future.
Aperia is a new generation industrial property with a Green
Mark Platinum Award. It offers a holistic and integrated work
environment for businesses in Singapore. We also widened
our customer base to include more renowned multinational
corporations (“MNCs”).
With its superior location and high quality specifications, we are
able to command higher rents of around S$5 per square foot
per month for the B1 industrial space, significantly higher than
the average market rents for the high-specifications segment of
S$3.15
(1)
per square foot per month.
Hyflux Innovation Centre and The Kendall are income-generating
properties with attractive yields of 6.8 – 7.0%. These properties
also sit on land with long remaining tenures of 54 – 64 years, an
attractive attribute considering that new industrial sites released
by the Singapore government have shorter lease tenure of 30
years or less.
Is A-REIT’s China expansion plan on track or is it being
dampened by the continuing slowdown of the economy?
China is undergoing a challenging transition from export-driven
and debt-fuelled growth to a domestic demand-driven economy.
The Chinese government’s GDP growth forecast for 2015 is
7%, down from the 7.4% achieved in 2014. Softness in both
external and domestic demand, overcapacity, the anti-corruption
campaign, etc. are expected to exert pressure on the economy.
In view of the uncertainties, we are treading cautiously.
The impact on our existing business varies by location. Leasing
demand at A-REIT City @Jinqiao in Shanghai, which is more State-
owned Enterprises and MNC-driven, has been dampened by the
soft macro climate. However, occupancy has been creeping up
to 56% as existing tenants such as Huawei expanded and as
new tenants are secured. Ascendas Z-Link in Beijing remains
100% occupied and rental reversion remains robust, thanks to
the vibrant IT and start-up sector. Overall, our opportune entry
enabled A-REIT to achieve unrealised capital gains of between
40% and 50% over original costs for both the Shanghai and
Beijing business park properties.
Amid the headwinds, pocket of opportunities still exists.
A-REIT will continue to focus on business parks and pursue
opportunities within the logistics segment. Industrial land for
(1) Source: CBRE, 4Q 2014
14 15
