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Rating Action:

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

18 Feb 2022

Singapore, February 18, 2022 -- Moody's Investors Service has assigned a senior unsecured rating of A3 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 is 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 capture 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.

The trust completed SGD1.7 billion of acquisitions over the past 12 months, of which SGD853 million was funded by equity and SGD145 million by asset divestments. The transactions have improved the geographic diversification of Ascendas REIT's portfolio as around 69% of the SGD1.7 billion acquisitions were for overseas assets. As of 31 December 2021, investment properties in Singapore accounted for 61% of the trust's $16.3 billion portfolio.

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 7.6x-7.9x and adjusted EBITDA/interest expense at 4.8x-5.1x.

Ascendas REIT's liquidity is inadequate over the next 12-18 months. Nonetheless, the trust's track record of funding access and established banking relationships will likely mitigate this refinancing risk. As of 31 December 2021, the trust had cash and cash equivalents of SGD369 million, compared to SGD627 million of utilized revolving credit facilities as well as SGD624 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 Investment Limited 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 31 December 2021, the trust had a diversified portfolio of 93 properties in Singapore, 34 in Australia, 49 in the UK and Europe as well as 41 in the US, with a total valuation of SGD16.3 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 31 December 2021, CapitaLand Investment Limited 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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