Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST
“We are continuing to scout for opportunities in China. Over the next 3-5 years, if we find enough opportunities we could have about $1 billion (in assets),” Tan told Reuters in an interview on Tuesday.
The REIT hopes to buy its second asset in China by the end of this year, and is keen to acquire business parks that cater to technology companies from parent Ascendas, Tan said.
Company Name: ASCENDAS REAL ESTATE INV TRUST
| Research House: HSBC | Price Call: BUY | Target Price: 2.30 |
Ascendas Real Estate Investment Trust’s (A-REIT) (AEMN.SI) Singapore industrial properties will continue to make up the bulk of the portfolio even as it hopes to grow its China assets to about $1 billion over the next 3-5 years.
A-REIT CEO Tan Ser Ping said the property trust’s target is to have 80% of its portfolio in Singapore and the remainder in China. A-REIT, which announced its maiden China deal in February, has no plans to expand into other countries.
“We are continuing to scout for opportunities in China. Over the next 3-5 years, if we find enough opportunities we could have about $1 billion (in assets),” Tan told Reuters in an interview on Tuesday.
China’s booming growth has spurred both local and foreign companies to expand their presence in the world’s second-largest economy, driving up demand for industrial space.
According to Tan, A-REIT’s push into China was partly in response to existing Singapore tenants desire to expand their operations there.
“China has developed to such a stage where every business is looking at that market. Within our customer base there’re many that are operating in China,” he said.
Tan added that there were relatively few developers that were familiar with industrial parks in China, providing A-REIT with an opportunty to grow its presence.
A-REIT is managed by Ascendas Group, a real estate firm that is wholly owned by Singapore industrial infrastructure planning agency JTC Corp. The REIT has a large presence in Singapore with 93 properties worth $5.5 billion.
A-REIT announced in February it had signed a deal to purchase a business park in Shanghai for $117.6 million upon its completion at the end of next year.
The REIT hopes to buy its second asset in China by the end of this year, and is keen to acquire business parks that cater to technology companies from parent Ascendas, Tan said.
“We note that while the move to China is likely to be at a measured pace, it dilutes A-REIT’s Singapore exposure, which has traditionally been a draw for investors,” HSBC said in a report.
HSBC remains bullish on A-REIT, however, with an overweight call and $2.30 target price. A-REIT was traded at $2.07 around 2:05 a.m.
Turning to Singapore, Tan said the REIT’s properties will continue to command higher rents in line with the city-state’s efforts to grow its knowledge-intensive industries and high-end manufacturing services sectors.
Amongst the properties owned by A-REIT, the business and science parks properties are expected to enjoy the strongest rental increases, Tan said.
Property services firm DTZ said in a report earlier this month that rental growth for hi-tech industrial space in Singapore rose at a faster pace in the second quarter, as some office tenants opted for cheaper premises.
The average monthly gross rent for private high-tech space, which includes business parks, rose 4.5% quarter-on-quarter to $3.45 per square foot per month after rising 3.1% in the preceding three-month period, according to DTZ.
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