REIT ASIAPAC
F E AT U R E
U.S., the world’s biggest and most mature
REIT market, there is no leverage cap for
REITs. “I think the market enforces its
own rules particularly in the listed space,”
he says. a-iTrust’s gearing is at 31%, as of
March 31, 2019.
Fe a t u r e
WHY DOES ASCENDAS
INDIA TRUST PREFER TO
MAINTAIN ITS LISTING IN
SINGAPORE?
EXPANSION PLANS
IN INDIA
Sanjeev Dasgupta,
CEO of Ascendas India Trust
As India’s economy continues to grow
around the 7% mark, a-iTrust, which
has about S$1.9 billion of assets under
management, plans to expand further in
the country. “We will continue to grow
with our existing strategy of developing
the remaining land bank on our existing
parks and making accretive acquisitions,”
says Dasgupta. He also added that the
company would be interested in other
a-iTrust has seven IT parks and six
warehouses in the South Asian country
with a total floor area of 12.6 million sq. ft.
The assets are spread across Bangalore,
Chennai, Hyderabad, Pune and Mumbai,
and a-iTrust is planning to increase its
floor area in the country by approximately
60% in the next 3-4 years.
DEVELOPMENT LIMIT
International Tech Park Bangalore
Chief Executive Officer Sanjeev Dasgupta remains
positive about growth in India as a-iTrust aims
to expand its commercial space in the country by
60% in the next 3-4 years.
Ascendas India Trust (a-iTrust), listed in Singapore in 2007, has no immediate
plans to move its listing to India because the process will entail considerable
risks and costs.
“One big challenge for Indian REITs is the cost of financing, which is usually
higher than the cost of buying an income-producing asset, and that negative
carry makes it difficult to acquire accretive assets, at least in the first few years.
Gradually as the rentals go up, the yields will go up, but at the initial stage, it can
be challenging,” he says. There is no simple mechanism to transfer the listing;
however, we are closely monitoring REIT developments in India, according to
Dasgupta.
India’s first REIT, the Blackstone Group-backed Embassy Office Parks, made its
trading debut on April 1 this year. For a-iTrust to transfer its listing to India will
involve taking its Singapore’s entity private and then re-listing in India. Dasgupta
10
added that unless the valuation of a listing in India
is “a lot better” than in Singapore, the company
will find it difficult to justify transferring its listing
to India. Another critical driver of maintaining
its listing in Singapore is the city state’s robust
governance framework and reputation as a REIT
listing destination, he says.
Nevertheless, Dasgupta is encouraged by the
developments in the India REIT market. “The
introduction of a REIT market in India would
lead to enhanced transparency and governance
in the real estate sector and a greater inflow of
institutional funding, which would be beneficial to
the economy,” he says.
CURRENCY HEDGE AND
NARROW CREDIT SPREADS
To overcome the cost of funding in India, a-iTrust
hedges its offshore currency exposure.
“Funding offshore in various currencies
such as SGD and JPY and then hedging
them into rupees allows us to achieve a
lower cost of financing. Even after taking
into account the cost of hedging, there are
significant savings for us between the cost
of financing in India and Singapore. For an
entity like us, this is important, given that
REIT vehicles are continuously raising
capital both in the form of debt and less
frequently in the form of equity,” explains
Dasgupta.
He added that credit spreads on its loans
in the last few years had been reduced due
to its robust business performance, strong
track record and financial credibility. “It
also helps that a-iTrust is managed by
a strong sponsor, Ascendas-Singbridge
Group, which holds a 23% stake in the
Trust,” says the company.
a-iTrust was structured as a business trust
when it went public more than a decade
ago instead of a REIT.
Under Monetary Authority of Singapore
(MAS) rules at that time, trusts could
only be listed as a REIT if the proportion
of assets under development as a ratio of
its total portfolio value was under 10%.
A-iTrust had a development limit of 20%
to cater for the large development land
potential in its parks. In 2015, MAS raised
the development limit for REITs to 25%,
subject to conditions.
As REITs in Singapore lobby for a higher
gearing limit from the current statutory
requirement of 45%, Dasgupta’s view is
that regulators could consider allowing
market forces to determine the optimal
level of debt. “The market is often the best
judge because if a particular REIT is highly
geared and seen to be risky, investors will
sell the units,” he says, adding that in the
11
International Tech Park Bangalore
asset classes besides IT parks, offices
and warehouses, such as data centres.
The company recently entered into
the logistics market, tapping the rise
of e-commerce and investments in
manufacturing.
On its growth strategy, Dasgupta says the
trust has about 7.1 million sq. ft. of assets
under development, and it will continue to
be on a lookout for third-party assets. Of
the 7.1 million sq. ft., about 1.2 million sq.
ft. has already been leased.
“Demand has consistently outpaced
supply over the last few years,” says
Dasgupta. Across its portfolio, the
committed portfolio occupancy rate
has risen to about 99% as at March 31,
2019, supported by a robust outsourcing
and offshoring sector as well as the
e-commerce
and
the
co-working
industries.