logistics development, particularly in and around Tier 1 cities
in China is very, very scarce and limited in supply. Hence, we
recently seized the opportunity to acquire a site in Jiashan,
located at the outskirt of Shanghai. A 35,244 sqm modern
logistics facility will be built and is expected to complete
in 1Q2016. It is well located i.e. within an hour’s drive to
downtown Shanghai and will tap the growing e-commerce
fulfilment centered around Shanghai.
Stricter measures and policies have been imposed
on the industrial property sector in Singapore. What
impact do these measures and policies have on A-REIT
and its strategy?
The recent changes in the policies pertaining to industrial
properties, which include shorter industrial land tenure,
payment of upfront land premium, and revised and more
stringent subletting policy, on top of record new industrial
space completions have resulted in a more challenging leasing
and investment landscape.
To adapt, we are making improvements in our operating
platform on two main fronts: leasing and investment.
On the leasing front, we will work closely with our Property
Manager to further improve the level of service to and
engagement with our customers to defend and improve
A-REIT’s portfolio occupancy.
On the investment front, A-REIT will continue to position its
property portfolio to cater to the higher value-add industries.
We can still bank on the Sponsor’s portfolio of more than S$1
billion worth of properties in mainly the Business & Science Park
segment. We will also look to recycle capital by divesting some
properties that have limited scope for further income growth.
Although A-REIT has a market-leading portfolio in Singapore,
given the overall growth constraint in Singapore, A-REIT will
explore selectively more developed and mature markets for
opportunities that will fit our profile and investment return
criteria. We will be guided by our mission to deliver stable
distributions to and maintain capital stability for our Unitholders.
We will balance this with our desire to grow our business by
adopting a disciplined and selective approach when evaluating
investment opportunities.
The island-wide industrial market rents and occupancy
have moderated in 2014 and will most probably continue
to moderate in 2015 and 2016. What plans does A-REIT
have to overcome this trend?
Record industrial space completions in 2014 to 2016 will
heighten competition for customers.
It is crucial for A-REIT to differentiate ourselves by enhancing our
assets, strengthening our operations and improving customer
service and operational productivity to deliver a comprehensive
suite of business space solutions for our customers.
This year, we will undertake several asset enhancement
initiatives to improve the specifications of our properties to
suit customers’ requirements such as having amenities like
eating places and better connectivity between buildings. For
example, the rejuvenation of the Singapore Science Park I and
II is underway. Besides enhancing several properties within the
parks, we have also launched an exclusive clubhouse (Oasis) for
our tenants. The clubhouse features spaces for business and
social interaction including food and beverage destinations, an
auditorium, meeting rooms, swimming pool and a fitness club
spanning 12,000 square feet.
Apart from providing suitable property hardware, we continue
to develop our operation team to better serve our customers.
The improvement in our employees’ soft skills and knowledge
will further improve their level of service and engagement.
With the right assets, a strong operating platform together with
balance sheet strength, we are confident that we can navigate
the changing landscape and continue to deliver sustainable
returns to Unitholders.
With rising interest rates on the horizon, how will you
manage interest rate risks?
A-REIT maintains a healthy aggregate leverage of about 33.5%.
We took advantage of the current low interest rates to hedge
68% of our exposure for the next 3.7 years. For the unhedged
portion of our interest exposure, A-REIT’s distribution is expected
to decrease by 1.9% for every 1% increase in interest rate.
We adopt a prudent approach to capital management. With
Moody’s A3 credit rating, we are able to finance our debt
at attractive rates. The weighted average portfolio borrowing
cost was 2.7% per annum for FY14/15.
I N T E R V I E W W I T H T H E M A N A G E R ’ S C E O
ASCENDAS REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2014/15
