AIMS APAC REIT: New 5 Year Non-Call Perpetual Bond
Timothy Ang |
06 Aug 2020 |
- AIMS APAC REIT (AAREIT) new subordinated perpetual bond issue 5-year non-call with Initial Price Guidance at 5.75% area and reset based on 5-year SOR + Initial Spread. Issue size of S$200mn, dividend stopper covenant, for general corporate purposes.
- Demand for logistics and warehouse properties fuel AAREIT’s resilience in the current challenging economic climate attributed to AAREIT’s focus on quality business park spaces and modern ramp-up facilities, as well as strong leasing structure. With ample debt headroom and undrawn credit facilities, focus will be developing unutilised GFA.
- The new perpetual is priced generously with a sub-senior yield pickup of 1.98% vs the senior AAREIT 3.6% Nov2024 (YTM 3.76%). AAREIT’s TTM dividend yield was 7.5%.
AIMS APAC REIT is a real estate investment trust listed on the Main Board of the SGX-ST on 2007. The Group owns a portfolio of 27 industrial properties, 25 in Singapore, 1 in Gold Coast, Queensland, Australia, and 1 business park in Macquarie Park, NSW, Australia. AAREIT is managed by AIMS APAC REIT Management Limited.
- Stable performance amidst COVID-19. 1Q21 gross revenue fell S$1.0mn qoq to S$27.2mn, dragged by S$2.6mn provisions made for rental waivers to SME tenants and expiry of master lease at 541 Yishun Industrial Park A. NPI declined S$1.9mn qoq to S$18.6mn from lower revenue and higher operating expenses. Stable results were driven by strong occupancy rates despite negative rental reversions for the quarter.
- Strong cash flow visibility from above-sector occupancies and master leases. Healthy demand for logistics and warehouse property drove occupancy up 4.2% qoq to 93.6% (compared to Singapore industrial average of 89.2%) from take up in 20 Gul Way and 27 Penjuru Lane. This was offset by a master lease expiry at 541 Yishun Industrial Park A. Logistics and warehouse made up 46.4% of GRI in 1Q21. With 16.2% of leases expiring in FY21, we expect demand for industrial space as well as the group’s master leases (30.3% of 1Q21 GRI) with built-in rental escalations to support occupancy and rental rates.
- Room for organic growth. Aggregate leverage ratio of 35.4% is significantly lower than MAS leverage limit of 50%, providing debt headroom of S$231mn (holding assets constant), with undrawn credit facilities of S$183.8mn. All FY21 debt was successfully refinanced. AAREIT’s strong liquidity profile with no refinancing needs until Nov 2021 allows it to focus on the 502,707 sqft of unutilised GFA for organic growth opportunities.
As the first perpetual bond issued by a REIT since the pandemic, we think the new perpetual is priced attractively within a sector proving relatively resilient amidst COVID-19 pandemic. Safety concerns are buffered by the group’s healthy liquidity profile and debt headroom while it explores organic growth.
- Rising Interest rates. Higher interest rates increase the cost of debt and diminish interest coverage and NPI. However, this risk is mitigated by 81.1% of AAREIT’s debt hedged at fixed rates.
- Demand may be offset by a softer economy. While industrial space remains resilient during COVID-19, occupancy and rental reversions may be affected by the poorer economic outlook.
Phillip Bonds |
16 Sep 2021
Phillip Bonds |
03 Sep 2021
Phillip Bonds |
10 Aug 2021
These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.
The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the "Research") contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.
Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
Have an enquiry? Get in touch with us at (+65) 6212 1818 or message us below!
Not yet an account holder? Open an account online here