CapitaLand Ascendas REIT ((SG:A17U)) has held its Q2 earnings call. Read on for the main highlights of the call.
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During the recent earnings call, CapitaLand Ascendas REIT showcased a mixed sentiment. The company celebrated successful property acquisitions and redevelopments, maintaining high portfolio occupancy and achieving a significant divestment at a premium. However, there were concerns over a decline in gross revenue and challenges in the U.S. office market that could impact future performance.
High Portfolio Occupancy
CapitaLand Ascendas REIT reported a robust portfolio occupancy rate of 91.8%, with a notable rental reversion of 9.5% for leases renewed in the first half of the year. This high occupancy level underscores the company’s effective asset management strategies.
Successful Property Acquisitions and Redevelopments
The company completed the acquisition of the DHL Logistics Center in Indianapolis, U.S., and the redevelopment of 1 Science Park Drive. These strategic moves involved total acquisition costs nearing $1.2 billion, promising attractive net property income (NPI) yields ranging from 6% to 7.6%.
Divestment at a Premium
A significant highlight was the divestment of a Parkside business-based property in the U.S., which was sold at a remarkable 45% premium to its market valuation, reflecting strong market positioning and strategic asset management.
Stable Financial Metrics
The REIT maintained healthy financial metrics with a gearing ratio of 37.4% and a stable cost of debt at 3.7%. Additionally, the distribution per unit (DPU) saw a 2.1% increase compared to the second half of 2024, indicating financial stability.
Significant Leasing Activity
Leasing activities were robust, with the U.S. business park property in Portland achieving higher occupancy rates. Australia also saw improved occupancy driven by long leases in logistics properties, showcasing effective leasing strategies.
Decrease in Gross Revenue
Despite positive developments, gross revenue for the first half decreased by about 2% to $755 million. This decline was attributed to property divestments in Singapore, Australia, and the U.S.
Decline in Net Property Income
Net property income (NPI) experienced a slight decline of 0.9% to $1 billion, primarily due to lower operating expenses, highlighting areas for potential operational improvements.
Challenges in the U.S. Office Market
The U.S. office market continues to pose challenges, with potential downside risks expected in the second half due to ongoing market conditions, necessitating strategic adjustments.
Occupancy Decline in the U.S.
The U.S. occupancy rate declined by 0.7% to 87.3%, largely due to lease expirations at a logistics property in Kansas City, indicating a need for focused leasing efforts.
Forward-Looking Guidance
Looking ahead, CapitaLand Ascendas REIT provided detailed guidance on its financial and operational performance. The portfolio occupancy rate is expected to remain stable, with positive rental reversions across regions. The company plans to invest $725 million in income-producing assets in Singapore, while maintaining a stable weighted average lease expiry (WALE) of 3.7 years. Despite a slight decrease in gross revenue and NPI, the company remains focused on strategic acquisitions and divestments to drive future growth.
In summary, CapitaLand Ascendas REIT’s earnings call reflected a balanced outlook with strong asset management and strategic acquisitions, despite facing revenue challenges and market uncertainties. The company’s forward-looking strategies aim to capitalize on growth opportunities while navigating market dynamics.