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Rating Action:

Moody's assigns A3 to Ascendas REIT's euro medium-term securities drawdown

25 Oct 2021

Singapore, October 25, 2021 -- Moody's Investors Service has assigned an A3 senior unsecured rating to the proposed HKD-denominated notes to be issued by Ascendas Real Estate Investment Trust (Ascendas REIT, A3 stable) under its existing euro medium-term securities program, which Moody's has rated (P)A3.

Ascendas REIT will use the proceeds from the notes for general working capital purposes.

RATINGS RATIONALE

Ascendas REIT's A3 issuer rating is underpinned by its (1) diversified portfolio of high-quality industrial assets across Singapore, Australia, Europe, the UK and the US; (2) established market position as one of the largest industrial REITs in Singapore; (3) stable operating track record and resilient income from its properties that captures the growth in the third-party logistics, e-commerce, pharmaceutical, medical and IT sectors; and (4) prudent financial policies in maintaining healthy credit metrics while growing through acquisitions.

At the same time, Ascendas REIT's rating is constrained by its acquisitive growth strategy and use of short-term revolving credit facilities.

Moody's expects Ascendas REIT's credit metrics to remain within the A3 rating parameters over the next 12-18 months, with adjusted net debt/EBITDA at 7.2x-7.8x and adjusted EBITDA/interest expense at 5.0x-5.5x. Although the trust completed more than SGD2 billion of acquisitions over the past 12 months, these were mainly funded by equity raised of around SGD1.6 billion and asset divestments of SGD145 million. These acquisitions will be accretive to earnings over the next 12-18 months.

Ascendas REIT's liquidity is inadequate over the next 12-18 months. Nonetheless, the trust's track record of access to funding and established banking relationships will likely mitigate this refinancing risk. As of 30 September 2021, the trust had cash and cash equivalents of SGD434 million, compared to SGD555 million of utilized revolving credit facilities as well as SGD765 million of medium-term notes and term loans maturing over the next 18 months.

In terms of environmental, social and governance (ESG) factors, Moody's has considered the governance risk stemming from related-party transactions between Ascendas REIT and its sponsor, CapitaLand Investment Limited. This risk is mitigated by the regulatory oversight provided by the Monetary Authority of Singapore and exercised through the board, which consists mostly of independent directors. Further, there is an alignment of interest between Ascendas REIT and CapitaLand because the latter has an 18% stake in the trust.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

Moody's could upgrade the rating if Ascendas REIT continues to improve its geographic diversification while strengthening its credit metrics, such that its adjusted debt/total deposited assets falls below 35% and its adjusted net debt/EBITDA drops below 6.0x on a sustained basis.

On the other hand, Moody's could downgrade Ascendas REIT's rating if (1) the operating environment deteriorates, leading to higher vacancy levels and a decline in the trust's operating cash flow or a fall in asset valuations; or (2) the trust's credit metrics weaken, such that its adjusted net debt/EBITDA rises above 8.0x or its adjusted EBITDA/interest coverage falls below 3.5x.

In addition, a material change in Ascendas REIT's business risk profile resulting from an expansion into higher-risk jurisdictions could also pressure the trust's rating.

The principal methodology used in this rating was REITs and Other Commercial Real Estate Firms Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1272320. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Ascendas Real Estate Investment Trust (Ascendas REIT) was listed on the Singapore Stock Exchange in November 2002. As of 30 September 2021, the trust had a diversified portfolio of 97 properties in Singapore, 34 in Australia, 49 in the UK and Europe as well as 30 in the US, with a total valuation of SGD16.0 billion.

The trust's sponsor, CapitaLand Investment Limited, is a 52%-owned subsidiary of Temasek Holdings (Private) Limited (Aaa stable), which is wholly owned by the Government of Singapore (Aaa stable). As of 30 September 2021, CapitaLand held an 18% stake in Ascendas REIT.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

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Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Hui Ting Sim
Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Vikas Halan
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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