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Chairman's Message

Chairman Message

Dear Unitholders,

On behalf of the Board of Directors of Ascendas Funds Management (S) Limited (AFM), the Manager of Ascendas Reit, I am pleased to present Ascendas Reit’s 15th Annual Report for the financial year ended 31 March 2017.

For the most of the last 12 to 18 months, the global business environment lacked direction and was full of uncertainties. In Singapore, we were faced with several headwinds including the increasing supply of industrial properties, stringent government policies and limited growth opportunities.

Nevertheless, I am happy to report that both Ascendas Reit’s distribution per Unit (DPU) and assets under management (AUM) grew during the last financial year. The Manager was able to carefully grow the Australia portfolio, complete the disposal of the China assets while realising considerable value, and further strengthen the balance sheet.

All these will put Ascendas Reit on a stronger footing even as the business environment continues to remain uncertain.


Ascendas Reit achieved a full year DPU of 15.743 cents, an increase of 2.5% over the previous financial year. The improvement was mainly attributable to the full year contribution from the Australian portfolio and ONE@Changi City, which were acquired in FY15/16.

Despite a tougher operating environment in Singapore, we were able to improve overall portfolio occupancy to 90.2% from 87.6% a year ago and realised a modest positive rental reversion of 3.1%.


AFM, with its new CEO, Mr Chia Nam Toon, will continue to explore value-accretive opportunities. We acquired S$565.6 million of business and science park properties at 12, 14 & 16 Science Park Drive in Singapore and 197-201 Coward Street in Sydney, Australia. The positive attributes of good locations and long weighted average lease expiries (WALE) of the newly acquired properties, further boost the quality of our overall portfolio.

Asset enhancements will continue to be a key area of focus to maximise the potential returns from our existing portfolio. During the year, S$35.8 million of asset enhancement initiatives across five properties were completed. Another S$114.3 million worth of redevelopment and asset enhancement initiatives are in progress.

We took advantage of the strong acquisition appetite in China to divest three properties at attractive capitalisation rates of about 5%. This translates into total proceeds of about S$407.6 million. Four Acres Singapore was also divested to the incumbent tenant, Unilever Asia Pacific Private Limited, for S$34.0 million. In total, we realised capital gains of S$194.6 million over original costs.

Ascendas Reit continues to maintain an A3 credit rating from Moody’s. This is due to our stringent adherence to keep aggregate leverage healthy at 33.8% and to ensure key credit and liquidity ratios are robust. The improved aggregate leverage ratio will allow us to pursue compelling acquisition opportunities comfortably.


Market conditions continue to evolve rapidly. Our challenge is to not only keep pace, but to anticipate, move ahead of market trends and to take advantage of any opportunity that may arise. We also need to adjust our portfolio mix to meet the ever-changing demands of our existing and potential customers.

With our current diverse portfolio, we are able to provide customers a variety of property solutions. For example, we converted 50 Kallang Avenue into a single-tenant building for an existing customer who was looking to expand. Occupancy for 50 Kallang Avenue will improve from about 48.3% (as at 31 March 2016) to 100%. The tenant has also committed to a long lease term.

To contain rising business costs, we will strive to improve productivity and deepen our customer engagement by continuously reviewing all our operation and management systems to see where we can do the same thing better and more cost effectively.

We negotiated bulk contracts for major enhancement works and implemented energy and water saving initiatives across our properties to reduce costs. Our service culture programme, which was piloted in one-north and the science parks in FY14/15, was subsequently rolled out to other property clusters during the year. We are already seeing early signs of improvement in service delivery based on customers’ feedback. You can read more about our initiatives and results in our Sustainability Report.


I would like to thank Mr Teo Eng Cheong, who stepped down as independent director in September 2016, for his valuable contributions over his five-year tenure.

At the same time, we are pleased to welcome Mr Lim Hock San who joined AFM as an independent director last July. Mr Lim is the President and Chief Executive Officer of United Industrial Corporation Limited. I am confident that his expertise and experience in property development and investment will complement the diverse strengths of the Board.

The Board comprises of seven independent directors, two nonexecutive directors and one executive director. We are fortunate to have a Board of Directors whose members come from a diverse background and experience.


Several events and trends such as geopolitical tensions, ‘Brexit’, unknown U.S. foreign and trade policies and disruptive technologies have created uncertainties in the global markets. These are expected to affect the economic conditions and business operations in a small and open economy like Singapore.

We need to be more vigilant and nimble. Our market leading position developed over 14 years of operating in Singapore and a very supportive Sponsor, the Ascendas-Singbridge Group, has strengthened our ability to adapt and grow in these uncertain times, and we need to continue to sharpen and hone our competitiveness.

As we keep growing our portfolio in Singapore and Australia, gaining greater economies of scale and operational efficiency, we will continue to optimise returns to ensure a steady stream of income and sustainable growth for Unitholders in the longer term.


I would like to thank all our colleagues of the Manager and Property Manager for their dedication and hard work in delivering these results. Finally, we would like to thank you, our stakeholders including Unitholders, customers and business partners for your continued support.

As we endeavour to uphold the trust that our stakeholders have placed in us, our long-term commitment is to deliver value for investors and position Ascendas Reit for future growth.

19 May 2017