Business & Light Industrial Warehouse ... - Ascendas REIT · A-REIT FY06/07 Results .. 22 Sources of demand for new leases –broad based FY06/07 tenants sector by net lettable area

FY2006/07 Financial Results Presentation

18 April 2007

Business & Science Park

Light Industrial

Logistics and DistributionHi-Tech Industrial

Warehouse Retail Facilities

A-REIT FY06/07 Results .. 2

This presentation may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from similar developments, shifts in expected levels of property rental income and occupancy, changes in operating expenses, including employee wages, benefits and training, property expenses and governmental and public policy changes and the continued availability of financing in the amounts and the terms necessary to support future business. You are cautioned not to place undue reliance on these forward looking statements, which are based on the Manager’s current view of future events.

Disclaimers

This Presentation is focused on comparing results for the full year ended 31 March 2007 versus results achieved for the full year ended 31 March 2006. This shall be read in conjunction with A-REIT’s Results for the period from 1 April 2006 to 31 March 2007 in the SGXNet announcement.


Agenda

• Key highlights

• Financial performance

• Capital and funds management

• Investment update

• Portfolio update

• Market outlook

• Going forward


Key Highlights• FY06/07 net income available for distribution of $163.8m, up 14.9% yoy

• FY06/07 DPU of 12.75 cents, up 9.2% yoy

• Achieved organic growth of 2.7%

• Portfolio occupancy 96.6% at 31 March 2007 vs 95.0% at 31 Mar 2006. MTB occupancy was 93.7% vs 91.4% at 31 Mar 2006

• Asset values increased by $148.9m (4.9%) following recent revaluation exercise. NAV increased by 11.2% to $1.49

• Completed 1st two development projects on schedule and at lower than expected development cost

• Secured acquisition and development projects of $488m in FY06/07. $148m is pending completion

• Total assets increased from $2.8bn to $3.3bn as at 31 Mar 2007


Agenda

• Key highlights





• Market outlook

• Going forward


Distribution Details

30 May 2007Distribution payment date

30 April 2007, 5.00 pmBooks closure date

26 April 2007, 9.00 amEx-date

25 April 2007Last day of trading on “cum” basis

18 April 2007Notice of books closure date

Distribution Timetable

1.198 26 Feb 07 to 31 Mar 07 AscendasreitA

3.301 Jan 07 to 31 Mar 07 AscendasreitDistribution per unit

(cents)Distribution PeriodStock counter


12.75163,824148,382(23,188)(38,777)210,347(72,660)283,007

FY06/07 (1)

20(19,273)Non-property expenses

74(3)(22,293)Borrowing costs

911.68Distribution per unit

15142,633Available for distribution

12131,992Net income

173,558(53,595)227,153

FY05/06 (1)

36(2)Property operating expenses

21

25

% Change

Net property income

Gross revenue

(S$’000)

DPU – FY06/07 is 9.2% above FY05/06

Notes:• Based on 77 properties as at 31 March 2007 versus 64 properties as at 31 March 2006• Property expenses have increased by a greater percentage due to aggregating energy costs for some properties and

on-charging such costs to tenants, resulting in higher costs as well as higher revenue. If such energy costs are excluded, property expenses would have only increased by 15%

• If non-cash adjustments under FRS39 are excluded, borrowing costs increased by 56% due to higher interest rates as well as increased borrowings to fund property acquisitions in FY06/07


3.3042,72439,812(4,542)

(11,248)55,602

(18,439)74,041

4Q FY06/07 (1)(2)

7(4,264)Non-property expenses

18(3)(9,502)Borrowing costs

33.20Distribution per unit

440,959Available for distribution

138,994Net income

1(18,309)Property operating expenses

5

4

% Change

52,760Net property income

71,069

3Q FY06/07 (1)

Gross revenue

(S$’000)

DPU – 4QFY06/07 is 3.1% above 3QFY06/07

Notes:• Based on 77 properties as at 31 March 2007 versus 68 properties as at 31 December 2006• For quarter to quarter comparison, performance fees of $6.6 million were excluded from the non-property

expenses• If non-cash adjustments under FRS39 are excluded, borrowing costs only increased by 9% over the period

due to additional debt drawn down to fund new acquisitions and slightly higher interest rates over the quarter


Revenue and NPI - 17 quarters of continued growth since IPO

Net Property Income

0

10

20

30

40

50

60

4Q F

Y03

1Q F

Y04

2Q F

Y04

3Q F

Y04

4Q F

Y04

1Q F

Y05

2Q F

Y05

3Q F

Y05

4Q F

Y05

1Q F

Y06

2Q F

Y06

3Q F

Y06

4Q F

Y06

1Q F

Y07

2Q F

Y07

3Q F

Y07

4Q F

Y07

$'mGross Revenue

0

10

20

30

40

50

60

70

80

4Q F

Y03

1Q F

Y04

2Q F

Y04

3Q F

Y04

4Q F

Y04

1Q F

Y05

2Q F

Y05

3Q F

Y05

4Q F

Y05

1Q F

Y06

2Q F

Y06

3Q F

Y06

4Q F

Y06

1Q F

Y07

2Q F

Y07

3Q F

Y07

4Q F

Y07

$'m


Yield returns compared to 10-year bond and S-REITs

Source: IBES Estimates, Bloomberg

S-REITs yield range from low of 2.0% to high of 8.7%

2.0%

5.3%

8.7%

2.9% 2.9% 2.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

S-REIT High A-REIT S-REIT Low0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Yield (LHS) 10-year bond yield (RHS) Weighted average S-REITs' yield

582 bps spread

-92 bps spread

243 bps spread

Wtd avg yield = 4.1%


Agenda

• Key highlights





• Market outlook

• Going forward


Balance sheet

134 cents149 centsNet asset value per unit

36.9%

1.7

1.0

2.8

As at 31 Mar 06

37.3%Aggregate Leverage

2.0Net assets attributable to unitholders

1.2

3.3

As at 31 Mar 07

Borrowings

Total Assets

(S$bn)

Strong balance sheet which provides additional debt capacity of more than $450m to fund acquisition and development activities before optimal gearing reached


Capital Management

Notes:

(1) Aggregate leverage includes deferred settlements

(2) Including margins and weighted swap rates for hedged debt and current floating rates on unhedged debt, and amortisation of CMBS’ establishment and annual maintenance costs

4.3 years3.6 years Weighted average term for fixed debt

75.3%83.6%Fixed as a % of total debt

6.96 times6.58 timesInterest cover ratio

36.9%37.3%Aggregate leverage (1)

3.49%3.37%Weighted average all-up funding cost (2)

S$733mS$990.7m• Fixed rate debt

S$973mS$1,185mTotal debt

31 Mar 200631 Mar 2007Debt Profile


Proactive interest rate management• Staggered maturities in hedging profile to manage interest rate risks

• Interest rate cap which is expiring in May 2007 has been replaced with fixed rate swaps

• For FY07/08, 95% of interest exposure is fixed with an weighted average term of 4.5 years at a weighted average cost of 3.38%

• The balance 5% and any further debt drawdown will be at prevailing market rate

Hedging Profile

27%

5% 9%21%

35%47%

71%87%

62%

95% 91%79%

65%53%

29%13%

Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14

Floating Rate Cap Fixed Rate

11%


Agenda

• Key highlights





• Market outlook

• Going forward


Investment highlights

1Q 200832Plot 7 & 8 Changi LogisPark (North)

1Q 200864Asset enhancement of SENKEE Logistics Hub

1H 200823Logistic & Distribution Centre at Pioneer Walk

1Q 200829HansaPoint @ CBP

148Total

Value (S$m) Expected completion

• Secured $488m worth of acquisitions and development deals in FY06/07

• $340m has been completed during the year

• $148m worth of investments awaiting completion as follows :


Status of development projects

• Completed 1st 2 development projects, Courts Megastore in December 2006 and Giant Hypermarket in February 2007

• Projects were completed on schedule and total development costs were within budget

• Unrealised revaluation gains of about $24.3m

Giant Hypermart

Courts Megamart


Status of development projectsHansaPoint @ CBP (Plot 15 Changi Business Park)

• Construction commenced in Nov 2006. On schedule to complete in Q1 2008

• Pre-committed space increased from 28% to 42%Artist impression

Dec 06 - Site cleared for construction

April 07 – Piling works completed


Status of development projectsPlot 7 & 8 Changi LogisPark (North)

• Partial built-to-suit logistics facility for Zuellig Pharma

• Construction commenced in Feb 2007 and expected to complete in Q1 2008

Artist impression

April 2007 - Site cleared for construction


Agenda

• Key highlights





• Market outlook

• Going forward


Portfolio Highlights –13% increase in new demand

6.8

209,400(2)

61,074(2)

148,326(2)

96.6%93.7%

As at

31 Mar 07

95.0%91.4%

A-REIT Portfolio occupancy A-REIT MTB (1) occupancy

151,163(3)

53,941(3)

97,222(3)

Total Portfolio renewals/new leases (sqm) Total New leases/Expansions (sqm) Total Renewals (sqm)

6.7Weighted Average Lease to Expiry (years)

As at

31 Mar 06

Notes : 1) MTB = Multi-tenanted buildings which accounts for about 51% portfolio value2) For the financial year ended 31 Mar 073) For the financial year ended 31 Mar 06


Sources of demand for new leases – broad based

FY06/07 tenants sector by net lettable area

R&D4%

IT14%

Biomedical5%

Electronics16%

General Manufacturing9%Precision Engineering

12%

Transport and Storage23%

Lifestyle and Apparels6%

Others11%


Subsector Performance

91.4%

92.5%

95.2%89.6%

90.8%89.5%

Occupancy@ 31 Mar 06

4.3%4.3%94.5%Flatted Factories

93.7%Total Portfolio (MTB)

5.2%2.5%97.1%Light Industrial

-2.6%3.1%90.4%Logistics & Distribution Centres

95.5%92.8%

Occupancy @ 31 Mar 07

11.8%18.5%Hi-Tech Industrial23.3%

Increase in new take up rates

13.1%

Increase in renewal

rates

Science and Business Park

Multi-tenanted properties

Strong occupancy improvement and increase in rental rates achieved for suburban office space in FY06/07


A-REIT Portfolio Occupancy Higher Than Market

Source: URA: Urban Redevelopment Authority Official Statistics as at www.ura.gov.sg and Ascendas-MGM Funds Management Limited (“A-MGM”) as at 31 March 2007.

98.0%

90.1%

97.0%96.9%

85.8% 85.9% 85.9%88.7%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

100.0%

Business Park Light Industrial Hi-Tech Industrial Logistics

A-REIT URA

Occ

upan

cy R

ate

(%)


Asset Enhancement

• Asset enhancement potential for existing properties where plot ratio could be maximised

• Telepark (Completed)• Converted part of existing vehicle access to increase GFA. Additional space

has been fully tenanted, resulting in a 0.3% yield increase on the property, which is worth about $191m

• Alpha (In progress) • Property is located in Singapore Science Park 2. In process of constructing

additional 3,527sq m of space which will be leased to FJ Benjamin upon completion, which is expected in December 2007

• Property yield expected to increase by about 0.5% after asset enhancement. Current property value = $56m


Portfolio Diversification by Value

Asset Class Diversification

49% 51%

Mix of Sale-&-Leaseback vs Multi-tenanted Buildings

27%

8%16%

25%

20%

4%


Spilt of short term & long term leases within sector

Science and Business Park

73.9%

26.1%

Hi-tech Industrial

64.6%

35.4%

Logistics and Distribution Centres

31.4%

68.6%

Multi tenanted

Sale and leaseback

Majority of leases in high growth sectors of science and business park and hi-tech industrial are on short term basis. Hence, potential to enjoy positive rental reversion

Light Industrial

17.2%

82.8%


Quality & Well-Diversified Tenant Base

Top 10 tenants make up 32.4% of the total portfolio income vs 33.9% at 31 March 06


Weighted Average Lease Term to Expiry• Weighted average term to expiry remains stable at 6.8 years• Lease expiry profile is well balanced and extends beyond 2021

13.4

%

12.2

%

10.7

%

7.9%

6.6%

1.2%

2.2% 6.

4% 8.0%

7.6%

5.8%

1.1%

3.2%

2.4%

2.2%

9.1%

0.0%

11.0

%

13.1

%

15.7

%

8.4%

2.1%

2.0%

8.4%

8.3%

6.4%

5.7%

1.6%

2.5%

1.2%

1.8%

11.8

%

0%

10%

20%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

>202

1

Year Ending 31 Mar

64 properties @ 31 Mar 06 77 properties @ 31 Mar 07

% o

f A-R

EIT

Prop

erty

Inco

me

6.8 yearsBased on 77 properties

As at 31 Mar 2007 6.7 years

Based on 64 properties

As at 31 Mar 2006Weighted average lease term to expiry


Agenda

• Key highlights





• Market outlook

• Going forward


Recovering Industrial Property MarketURA industrial rental index improved by 3.1% in 4Q 2006 and by 4.2% in 2006

65

70

75

80

85

90

2000

Q120

00Q2

2000

Q320

00Q4

2001

Q120

01Q2

2001

Q320

01Q4

2002

Q120

02Q2

2002

Q320

02Q4

2003

Q120

03Q2

2003

Q320

03Q4

2004

Q120

04Q2

2004

Q320

04Q4

2005

Q120

05Q2

2005

Q320

05Q4

2006

Q120

06Q2

2006

Q320

06Q4

Indu

stria

l Ren

tal I

ndex


Rents by Sub-sectors• Expansion demand as well as relocation of back office functions from more

costly CBD offices helped lift rents in suburban business space

• Average signing gross rents for Science and Business Parks and Hi-tech Industrial space rose by about 10% to $2.54 psf per month and $2.00 psf per month respectively in 2006

Source : Colliers for Hi-tech Industrial, Light Industrial and Logistics & Distribution Centres rents

JTC for Science and Business Parks rents

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06

Ren

tal r

ates

($ps

f pm

)

Light industrial Logistics and Distribution Centres

Hi-tech Industrial Science and Business Parks

$2.54

$2.00

$1.31

$1.17


0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2007F 2008F

Are

a ('0

00sq

m)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

occu

panc

y

85.8%

-200

-100

0

100

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F

Are

a ('0

00 s

q

40%

50%

60%

70%

occu

panc

200

300

400

m)

80%

90%

100%

y

Net New Supply Net New Demand Occupancy Rate

85.9%

Supply and Demand of Industrial Space

• New demand exceeded new supply in the last 2 years

• Persistent strong demand in relation to supply lifted occupancy to a current four-year high

• Limited new supply in business park sector in next 2 years

• New supply in factory space is primarily in light industrial sector. No current known new supply in hi-tech industrial sector for next 1 year

Business Parks

Factory Space (light industrial & hi-tech industrial)

Source : URA


Supply and Demand of Logistics Space

• New demand exceeded new supply since 2004, resulting in current high occupancy of 88.7%

• Significant new supply expected in 2007 (471,000sm), the highest in past 10 years

0

50

100

150

200

250

300

350

400

450

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F

Area

('00

0sqm

)

60%

65%

70%

75%

80%

85%

90%

95%

Occ

upan

cy

88.7%

Logistics & Distribution Centres

Source : URA


Outlook for Industrial Property Market • General outlook positive as economy continues to grow and the Singapore

government continues to restructure the manufacturing sector to attract FDI

• Positive outlook for Science & Business Parks and Hi-tech Industrial sectors

• Limited new supply in the next 2 – 3 years• Increasing demand due to spillover effect from backroom operations of financial

institutions currently located in CBD • New demand from MNCs setting up operations in S’pore due to government’s

continued incentives for regional headquarter and other services• 74% of science and business park sector & 65% of hi-tech industrial sector are on

short term leases

• Outlook for logistics sector weak• Given expected significant new supply, demand in 2007 has to almost double that

of 2006 to maintain occupancy and rental rates• As such, increase in occupancy and rental rates experienced in 2006 may not

follow through in 2007. • 69% of portfolio are long term committed leases

• Outlook for light industrial sector subdued• Although new supply in next 2 years is not significant compared to logistics sector,

occupancy and rental rates performance will depends on the strength of future demand

• 83% of portfolio are long term committed leases


Agenda

• Key highlights





• Market outlook

• Going forward


Growth Drivers

• Investment• acquisitions• development

• Organic Growth• rental rate reversions• occupancy rate improvements• asset enhancement opportunities


Asset Growth – target $5bn by end 2010

• On target to achieve asset size of $5bn by 2010 - additional acquisitions and developments of $400m per year required

• Remains committed to pursuing quality and sustainable yield accretive acquisitions

• Ascendas’ properties in Singapore (about $400m - $500m)

• Sizable acquisition opportunity in JTC’s portfolio for trade sale

• Total current development commitments of about $61m, i.e. available development capacity is $269m. Have a healthy development pipeline to maximise this capacity

• Every $100m of acquisitions at current cap. rates translate to increase DPU of 0.10 cents

• Impact of development projects on DPU could be double that of acquisitions projects but with longer time lag


Continued Organic Growth Expected• Stepped rental increases from properties with long term leases

• Positive rental reversions from short term leases • 57% of leases (about 103,422 sqm) due for renewal in FY07/08 are under-rented

• Gap between market and existing rents is between 6% to 25%, depending on sectors

Existing rents -------- Market rents Area which is under-rented

$2.04

$1.74

$1.18 $1.16

$0.90

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Science & BusinessPark

Hi-tech Industrial Flatted Factories Light Industrial Logistics &Distribution Centres

Area

due

for r

enew

al w

hich

is u

nder

-ren

ted

(sqm

)

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

Aver

age

rent

s ($

psf p

m)

$2.54

$1.35

$1.00

$2.10

$1.25


Continued Organic Growth Expected• Potential to further increase occupancy rates, especially in Science &

Business Parks and Logistics & Distribution Centres

90.4%Logistics and Distribution Centres

97.1%Light Industrial

94.5%Flatted Factories

95.5%Hi-tech Industrial

92.8%Science & Business Park

MTB occupancy rates @ 31 Mar 07

• Continue with cost management measures to benefit from economy of scale operations


A-REIT's strengthsDiversity and Depth• Largest business and industrial REIT in Singapore • Solid and well diversified portfolio

Six property asset classes

Well-located quality properties

Balance of long term vs short term leases provides stability and potential for positive rental reversions

No single property accounts for more than 6% of revenue

High predictability and sustainability in income

Market leader• Ascendas has a track record of more than 20 years• Committed sponsors• Market leader in business space in Singapore

• 38% share of Hi-tech Industrial space • 29% share of Science and Business Parks space • 11% share of Logistics & Distribution Centres space - 30% in the Eastern region

and 13% in Western region of Singapore


A-REIT's strengths

Development capability• Has development capability to create own assets

Operational platform• Dedicated sales/marketing, leasing and property management team of over 80

people• Possess in-depth understanding of this property sector

Customer focus• Track record of customers growing with us• High retention ratio of 92.5%

Size advantages• Market capitalization in excess of $3.3bn • 12% of S-REIT sector• 8% of Asian REIT sector ex Japan• Accounts for about 12% of total trading volume for S-REITs• Ranked 6th in the BT Transparency Index amongst all companies listed on SGX• Included in major indices (eg. MSCI, STI)


A-REIT's strategies

Optimisecapital structure

Optimisecapital structure

Value-Adding Investments

Value-Adding Investments

Proactive asset

management

Proactive asset

management

StabilityStability GrowthGrowth

Predictable incomePredictable income Capital stabilityCapital stabilityTotal returns

Outcome

StrategiesStrategies

Proactive and

dedicated manager

with track record


Regional Expansion

• Ascendas is in the process of evaluating options with regards topositioning of A-REIT:

- Singapore focus

- Regional expansion

- Take stake in other Ascendas’ funds


Critical Issues in Regional Investments

• Risk-adjusted returns commensurable to different risk profile?

• Foreign Exchange risk

• Execution: Operational platform


Important NoticeThis presentation has been prepared by Ascendas-MGM Funds Management Limited as Manager for Ascendas Real Estate Investment Trust. The details in this presentation provide general information only. It is not intended as investment or financial advice and must not be relied upon as such. You should obtain independent professional advice prior to making any decision. This Report is not an offer or invitation for subscription or purchase of securities or other financial products. Past performance is no indication of future performance. All values are expressed in Singaporean currency unless otherwise stated. January 2006

Thank you

FY2006/07 Financial Results Presentation

18 April 2007

Business & Science Park

Light Industrial

Logistics and DistributionHi-Tech Industrial

Warehouse Retail Facilities

Documents

Business & Light Industrial Warehouse ... - Ascendas REIT · A-REIT FY06/07 Results .. 22 Sources of demand for new leases –broad based FY06/07 tenants sector by net lettable area