Ascendas India Trust enjoyed another good year, demonstrating resilience for the Financial Year
ended 31 March 2010 (”FY2009/2010”). This was despite unclear global economic conditions
for most of the financial year, and many countries and businesses still enduring hardship
following the downturn.
The India economy is estimated to have grown by 7.2% in FY2009/2010 and is expected
to remain one of Asia’s strongest economic performers in the foreseeable future. The
India Government has forecast India’s Gross Domestic Product (“GDP”) growth at 8.5% for
FY2010/2011.
The year 2009 also witnessed the Congress Party taking office for another five-year term
after a convincing victory in the general elections held in May 2009. With a strong mandate,
we hope that this will pave the way for India’s Government to continue to implement longterm
structural economic reform and undertake infrastructure development that will sustain
economic growth.
While we are optimistic of the future, we are ever mindful of the experiences of ours and
others in the past. Hence, ‘Prospect with Retrospect’.
RETROSPECT
Fundamental Principles
Regardless of market conditions, we believe in offering products and
services that are distinguished and favoured by our clients, without losing
sight of the importance of creating value for Unitholders. These principles
guided us well through the recent global economic crisis.
FY2009/2010 in Review
In FY2009/2010, total property income grew by 2% to S$ 120.9 million.
Net property income, which expanded by 12% to S$ 73.8 million, outpaced
the growth of total property income. This was the result of the costmanagement
initiatives undertaken during the year. For instance, we
reduced cost by renegotiating a number of maintenance and insurance
contracts, and leveraging on economies of scale.
Distributable income increased by 1% to S$ 57.5 million, while DPU was
stable at 7.55 Singapore cents. a-iTrust unit price improved from S$ 0.505
on 1 April 2009 to S$ 0.97 on 31 March 2010. This 92% increase in a-iTrust
unit price outperformed the FTSE ST REIT Index and the Straits Times Index
(“STI”), which appreciated 79% and 70% respectively over the same period.
As at 31 March 2010, Net Asset Value attributable to Unitholders was
S$ 688 million or S$ 0.90 per unit. This was the result of an increase in the
fair value of our portfolio by 13%2, refl ecting a business environment more
favourable than that a year ago.
Stable Income-producing Assets
The a-iTrust portfolio currently consists 4.8 million sq ft of income-producing
space spread over 15 buildings in 4 Information Technology (“IT”) parks
located in the key Indian cities of Bangalore, Chennai and Hyderabad.
In addition, there is another 36 acres of land with 4.2 million sq ft
development potential in Bangalore and Chennai.
As a testament to our proactive portfolio management, a-iTrust’s incomeproducing
assets continued to enjoy strong occupancy rates of 95% to 99%,
or 97% as a portfolio, as at 31 March 2010. This compared favourably with
the market occupancy rates of between 63% and 88% for the micro-markets
where our properties are situated3. The strong portfolio performance was
underpinned by the following factors:
•
Diversified tenant base – Our largest tenant accounted for less than 5% of portfolio base rental. Further, our 10 largest tenants collectively accounted for only about 31% of base rental.
•
Diversifi ed activities of tenants – While the majority of our tenants
are engaged in IT and IT-Enabled Services (“ITES”) activities, their
underlying businesses are diverse, including amongst others, banking,
pharmaceuticals and manufacturing.
•
Tenant care – Regular interaction is maintained with the existing 248
tenants to keep abreast of their requirements at all times. As a result,
out of the 700,000 sq ft of space (15% of total) with leases which
expired during FY2009/2010, 77% had been retained. The balance
space not renewed has also been mostly leased out, resulting in high
occupancy rates.
•
International business lifestyle – It is paramount that the 58,000
professionals working in our parks enjoy their everyday life there.
The parks offer a full suite of amenities that cater to their daily needs
such as banking, food and beverage and retail. Apart from that, a variety
of activities are organised throughout the year, from sporting events to
those promoting environmental awareness, to ensure that the population
can feel a sense of camaraderie in the workplace while maintaining a
work-life balance.
•
Property improvements – Continuous pursuit of ways to enrich the
offerings at our properties and to increase income base. As an example,
we converted under-utilised space into retail shops and concierge desks,
which not only increased a-iTrust’s income but more importantly, further
improved the breadth of amenities.
•
Track record – In the annual tenant survey conducted in 2009 by Nielsen,
87% of the respondents were satisfi ed, while 67% were delighted
with the overall management services provided4. This was an
improvement from the year before, when the scores were 80% and 50%
respectively. In addition, 88% of respondents indicated that they were
likely to continue growing their business relationships with the
Ascendas Group.
2
In SGD terms and included Investment Property Under Construction. Valuation would have been about 9% higher in INR terms. Higher valuation this year was due to lower discount and capitalisation
rates used. Rates were lowered this year to refl ect stabilisation of the markets, after being increased last year when there was greater risk aversion.
3
Source: Jones Lang LaSalle Property Consultants Pvt Ltd. These are occupancy rates of the micro-markets in Bangalore, Chennai and Hyderabad within which a-iTrust properties are located.
4
Satisfaction was measured on a 7-point scale, where the delight score was based on the highest ratings of 6 and 7.
Prospect
Sound Balance Sheet
Prudent financial discipline has afforded a-iTrust a strong footing. As at 31
March 2010, our gearing (loan-to-value) level was 19%. This implies that
the Trust has the capacity to borrow an additional S$ 140 million from its
year-end debt position, before reaching the 35% gearing limit based on the
S$ 914 million5 asset value as at 31 March 2010.
Growing Responsibly
The Trust has no intention to rest on its laurels. Its sound balance sheet
allows a-iTrust to continue to take advantage of attractive development
opportunities or acquisitions as they arise.
Development
As part of the in-built development pipeline, we could develop an additional
4.2 million sq ft of space on land owned by the Trust. Out of this, 1.7 million
sq ft spread over 3 buildings is already under development, as follows:
Development Property
Area (sq ft)
Expected
completion
Park Square, a retail mall
development within ITPB
450,000
2nd half 2010
Zenith, a multi-tenanted office
building within ITPC
742,000
2nd half 2010
Yet-to-be-named and first
multi-tenanted building in ITPB’s
Special Economic Zone (“SEZ”)
535,000
Mid 2011
TOTAL
1,727,000
In the coming fi nancial year, we look forward to the completion of Park
Square and Zenith, which will add approximately 1.2 million sq ft (25%
increase) of business space to the portfolio.
The 3 ongoing developments are fully debt-funded by a combination of S$
60m 3-year senior unsecured fi xed-rate SGD notes and S$ 78m6 bilateral
INR term loan facilities, both organised during a relatively challenging
period in FY2009/2010. When both loans are fully drawn down, a-iTrust’s
loan-to-value ratio would be 21%, assuming property value and currency
exchange rate remain unchanged.
Acquisition
The Trust seeks acquisition that would not only add yield-accretive income
stream, but also diversify a-iTrust’s portfolio. Diversifi cation could include
entry into Indian cities in demand by clients where the Trust currently has
no exposure to, or altering the portfolio mix by having more exposure to SEZ
or non-IT parks. It could also be through diversifying the lease expiry profi le
or expanding the tenant base. Such acquisition could be through the rights
of fi rst refusal the Trust has or from the market.
Embracing the future
We look forward to a more stable business environment in the year ahead,
although the improvement may be gradual, and we are mindful of the
threats of infl ation and rising interest rates in India. Having learnt from the
crisis, multi-national corporations (“MNCs”) are now even more focused on
managing costs. India is in a prime position to benefi t as MNCs continue
to offshore or outsource to India to take advantage of its high-quality and
cost-competitive labour. India’s value proposition in this regard remains
undeniable, and has few comparable alternatives. In addition, the Indian
outsourcing and offshoring market which currently still consists largely of
companies from the United States of America (“USA”), has the potential
to grow steadily with the inclusion of new industries and countries. We
also believe that India’s economic growth would generate consumption and
related business opportunities, including more domestic IT work.
The Trust is well-positioned to leverage on the improving operating
environment and emerging trends moving forward.
5
Exclude minority interest.
6
Based on the exchange rate of INR 32.26 to S$ 1.00, for illustrative purpose.
Appreciation
We would like to thank our fellow Board members for their guidance and
dedication, and the Trust and property management teams for their focus
and hard work throughout the year. We wish to also express our sincere
appreciation to all our tenants and Unitholders, and look forward to their
continuing support and confi dence in a-iTrust.
Philip Yeo Liat Kok Chairman Ascendas Property Fund Trustee Pte Ltd (Trustee-Manager of Ascendas India Trust)
Jonathan Yap Neng Tong Chief Executive Officer Ascendas Property Fund Trustee Pte Ltd (Trustee-Manager of Ascendas India Trust)
