CapitaLand Ascendas REIT: Weak Occupancy Offset by Strong Reversions

We retained our SGD 2.90 per unit fair value estimate for CapitaLand Ascendas REIT after an in-line third-quarter business update. Its portfolio occupancy rate weakened to 92.1% as of the end of September 2024 from 93.1% a quarter ago, driven by lower occupancy rates in its US and Australia portfolios. Notably, its Australia portfolio’s occupancy rate fell the most, by 5.1 percentage points, due to the lease expiry at a Sydney logistics property. Management is in discussions with a prospective tenant about leasing up the space. Nevertheless, the weaker occupancy figures were offset by positive portfolio rent reversions of 14.4%. This was driven by strong rent reversions in its Singapore and Australia logistics portfolios that registered positive 31.7% and positive 52.3%, respectively. We fine-tuned our assumptions to account for the change in currency movements and the divestment of 21 Jalan Buroh for SGD 112.8 million. We expect the proceeds to be used to repay debt and subsequently recycled for future acquisitions. Our forecasts remain largely unchanged. We think the units are fairly valued currently.