Ascendas India Trust profit down 12% to $17mn

The trust’s operating portfolio grows by 25% as its properties are home to a total working population of 57,000 people from 283 tenants.

Ascendas Property Fund Trustee Pte Ltd, the Trustee-Manager of Ascendas India Trust (“a-iTrust”), on Wednesday reported the results of a-iTrust for the third quarter (ended 31 December 2010) of the financial year 2010/11 (“3Q FY2010/11”).

a-iTrust maintained its strong performance in 3Q FY2010/11. Total property income for the quarter was S$29.9 million, which was stable compared to 3Q FY2009/10 and 2Q FY2010/11, according to an a-iTrust report.

Net property income was S$17.0 million, or lower by 12%, due to retrospective increase in electricity tariff at International Tech Park Bangalore (“ITPB”) and lower-than-usual property expenses in the same period last year due to the reversal of a doubtful debt provision.

Distributable income for 3Q FY2010/11 was S$ 13.2 million, which was an increase of 1% over the preceding quarter. DPU for 3Q FY2010/11 similarly increased 1% from the quarter before to 1.72 Singapore cents.

Taking into account that 3.36 Singapore cents was distributed for the first half of FY2010/112, 9-month DPU was 5.08 Singapore cents. On an annualised basis, the 9- month DPU represents a yield of 7.3% and 7.1% respectively over the closing prices of S$ 0.93 and S$ 0.955 per unit on 31 December 2010 and 25 January 2011. Distribution is semi-annual, hence the third quarter’s distribution will be made with that of next quarter.

Gearing decreased to 19% as at 31 December 2010, from 21% as at the preceding quarter, due to an increase in asset value resulting from revaluation gains and additional construction in progress, and a loan repayment during 3Q FY2010/11. Net asset value attributable to Unitholders was S$ 0.83 per unit.

Chief Executive Officer of the Trustee-Manager, Mr Jonathan Yap said, “We are pleased to report that the occupancy rate of a-iTrust’s existing portfolio remains strong and ended the quarter at 98%. In addition, the operating portfolio expanded by 25% or 1.2 million sq ft in December 2010, with the completion of Park Square, a retail mall in ITPB, and Zenith, an IT Multi-tenanted Building (“MTB”) in International Tech Park Chennai (“ITPC”). Park Square not only increases income stream of, but also offers additional retail and food options in ITPB. We expect the occupancy levels of Park Square and Zenith to ramp up progressively. Unitholders can also look forward to the completion of Voyager, the first building within ITPB’s Special Economic Zone (“SEZ”), which sets to add another 0.5 million sq ft to the portfolio in the middle of 2011. As always, we remain active in exploring expansion opportunities, be it via additional development or third-party acquisitions, with the aim to continually provide yield accretion to Unitholders.”

A Well-Diversified Portfolio with High Occupancy
a-iTrust’s portfolio of 5.9 million sq ft of completed space is fairly evenly distributed among Bangalore, Chennai and Hyderabad.

a-iTrust’s properties are today home to a total working population of 57,000 people from 283 tenants, comprising mainly corporate tenants operating in various IT sub-sectors such as software development, business process off-shoring, research and development, and data centres. While their operations in our properties are IT-related, our tenants’ underlying businesses are diverse, such as financial services, IT services, manufacturing and pharmaceuticals. As at 31 December 2010, the largest tenant contributed about 4.1% of the portfolio base rent, while the top 10 tenants collectively accounted for about 28%4 of portfolio base rent, further demonstrating the low client concentration and diversified income base.

Occupancy rate for the portfolio as at 31 December 2010 was 98%. This exceeds market occupancy rates of 60% to 97%5 for the micro-markets in which the portfolio’s properties are located.

86% of a-iTrust’s tenants are multi-national corporations. Its tenants appreciate the “Ascendas Advantage” that comes with the portfolio being managed by the Ascendas Group. By that, the company refers to quality space, reliable solution and international business lifestyle. Hence, in addition to ensuring that the space continues to meet its customers’ requirements, a host of services and amenities are provided to develop a sense of community belonging within each park. For instance, 8 events were organised during the quarter for the users at its parks, such as the Ascendas Talent Hunt at ITPC held in October 2010 and Healthy Lifestyle & Sports Meet 2010 held at CyberPearl and The V in December 2010.

Three-Pronged Acquisition Strategy
As at 31 December 2010, a-iTrust’s total borrowing stood at S$ 180.8 million, reflecting a 19% gearing (loan-to-value). This level of gearing allows a-iTrust the flexibility to fund growth via development or acquisition using debt or equity, whichever more commercially viable at the time. At the current gearing level, the trust has an additional debt capacity of S$ 140 million or S$ 370 million before its gearing reaches 35% or 60% (loan-to-value) respectively.

a-iTrust enjoys a Right of First Refusal (“ROFR”) granted by Ascendas Land International Pte Ltd (“ALI”) to acquire its substantially income-producing business space. ALI owns CyberVale, an IT SEZ in Chennai comprising 535,000 sq ft of income producing space and 4.4 acres of land8, and a development project in Pune.

a-iTrust also has a ROFR from Ascendas India Development Trust (“AIDT”). With S$ 500 million of committed equity, AIDT’s target investment size is S$ 1 billion. AIDT has invested in development projects with about 10 million sq ft of business space development potential in India. This ROFR represents a significant acquisition pipeline of quality space for a-iTrust in the mid-term, as AIDT progressively develops the land. In addition to acquiring via ROFR, the Trustee-manager seeks to also acquire from the market.

Portfolio to Grow through Organic Growth
a-iTrust has proposed to develop about 1.7 million sq ft of new space on land it owns within its portfolio. About 1.2 million sq ft have recently been completed in December 2010, being Park Square (450,000-sq ft retail mall in ITPB) and Zenith (742,000-sq ft IT MTB in ITPC). A third building, Voyager (535,000-sq ft MTB in ITPB’s SEZ), is expected to complete in mid-2011.

In addition to the above, a further 2.5 million sq ft of space could be developed within the portfolio, which is largely within the SEZ in ITPB.

Looking Forward
The India economy grew 8.9% in 2Q FY2010/11, and the International Monetary Fund (IMF) had estimated GDP growth to be around 8.75% for FY2010/11. We are focused on positioning the trust to further create value for Unitholders by leveraging on India’s growth.

The Trustee-Manager will continue to focus on growing the operating earnings of its assets by actively managing the portfolio, optimising its capital structure, and further growing the portfolio through developing the land it owns and pursuing yield accretive acquisitions.