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Why I would not invest in Ascendas REIT

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Being Singapore’s first and largest listed business space and industrial real estate investment trust, Ascendas REIT has certainly come a long way. From eight properties valued at around $600 million in 2002, the Manager has grown the REIT to a market leader with total assets of about $10.4 billion, comprising 100 properties in Singapore and 31 properties in Australia. With such stellar track record, Ascendas REIT is definitely worth taking a look.

But the abrupt resignation of former CEO Chia Nam Toon in November 2017 had raised eyebrows among investors. After all, Mr Chia had joined Ascendas REIT for less than two years and resigned “for personal reasons”. Although the management had stressed that it would be “business as usual”, we all know the CEO plays an important role and to downplay the significance of the event would be ridiculous. Nevertheless, a new CEO – Mr William Tay Wee Leong – was appointed in February 2018.

Ascendas REIT

But the reason why I would not invest in this REIT supremo is not because of the change in leadership, but because of my concern on its financial health. For FY2017/18, the cash and cash equivalent was a negative $23 million. The REIT needed a bank overdraft amounting to approximately $48.0 million as at 31 March 2018, thus allowing the cash and cash equivalents to be reflected as “$25 million” in the balance sheet. For a REIT of such size, it is astonishing to note that Ascendas REIT has been burning so much cash, presumably because of its huge financing commitments.

Prospect for the logistics sector

In recent weeks, I have been studying REITs which specialize in logistics and are backed by Temasek Holdings. This is because according to a joint study conducted by Google and Temasek Holdings in 2016, Singapore’s [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: May 19, 2018 — 1:14 pm

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