About a Reit - Ascendas India Trust is not a Reit

If you have checked the SGX website, under the Prices, Indices, Statistics - REITs, you would have noticed that Ascendas India Trust is listed alongside the other REITs. Similarly, also in the SGX website under Products - REITs - Listed Reits, Ascendas India Trust is also listed there. But in actual fact, Ascendas India Trust (a-iTrust) is not a Reit, but it is a Business Trust. As mentioned in the previous posting All about REITs - REIT, Business Trust, and Shipping Trust, there are some differences between a Reit and a Business Trust. A Business Trust is not under the guidelines stated in the MAS Code on Collective Investment Schemes. However, a-iTrust has self-imposed some of these guidelines totally or partially:

• Although there is no gearing limit for a Business Trust, a-iTrust has imposed upon itself the same gearing limits as Reit. So it has a gearing limit of 35%, and up to 60% if it has a credit rating. But different from a Reit, it can also have a gearing limit of 60% without a credit rating if there is approval from the unitholders.
• As a Business Trust, it does not have a minimum payout ratio. However, a-iTrust will follow the Reit in distributing at least 90% of its distributable income.
• As a Business Trust, it does not have a limit on property development activities. For Reit, the limit is 10%, and the major part of its business should be in the form of property rental. Like a Reit, a-iTrust has imposed a limit on property development activities upon itself, but instead of 10% it has set it to 20%.

As for the roles of trustee and manager, a-iTrust is like the other Business Trust in having a single trustee-manager.

About a-iTrust
From the a-iTrust website:
"a-iTrust is a Singapore-based business trust ("BT") registered by the MAS established with the principal objective of owning income-producing real estate used primarily as business space in India, and real estate-related assets in relation to the foregoing. a-iTrust may acquire, own and develop land or uncompleted developments to be used primarily for business space with the objective of holding the properties upon completion."

The sponsor of a-iTrust is Ascendas Pte Ltd, a unit of Singapore government-owned industrial landlord JTC Corp. Ascendas Pte Ltd is also the sponsor of Ascendas Reit.


Property Portfolio and Growth

Currently a-iTrust has a portfolio of 4 IT Parks in Bangalore, Chennai and Hyderabad, with main tenants from the IT and ITES (IT-enabled services) sectors:

• International Tech Park Bangalore (ITPB)
• International Tech Park Chennai (ITPC)
• CyberPearl
• The V

There are 3 more buildings being developed and to be completed over the next 2 years:

• Zenith - Third building in ITPC. Expected completion 2nd half 2010.
  
• Park Square Retail Mall - In ITPB. Expected completion mid 2010.
• Multi-tenanted - 3rd office building in ITPB. Expected completion mid 2011.

These development projects will bring in additional 1.7 million square feet of incoming producing space, a 35% increase over the existing portfolio. On top  of these, there is some more land within ITPB, which after development, can potentially bring in an additional 2.5 million square feet of incoming producing space.

In terms of acquisition growth, a-iTrust has a rights of first refusal agreement with Ascendas India Development Trust and Ascendas Land International Pte Ltd, both of which are units under its Sponsor Ascendas Pte Ltd. It can also acquire properties from the open market if there are opportunities.

Risks
Attractive as it may be, a-iTrust is not without its own set of risks. Following are some of the risks to take note of:

• Country Risk. Since all its assets are in India, its fortune will be closely tied to the economic, and to a certain extent the political situation in India.
• Sector Risk. Its IT Parks tenant portfolio is concentrated in the IT and ITES sectors. Any downturn in these sectors will strongly impact the occupancy rates.
  
• Currency Risk. The rental income is in the Indian rupees. Any depreciation will reduced the dividend distribution in Singapore dollars. To manage currency visibility on the distribution to Unitholders, it has a currency hedging strategy of at least one year in advance. The rate hedged for May 2010 distribution is Rs 33.47 to S$ 1.