Ascott Residence Trust

Ascott Residence Trust: OCBC cut FV to $1.31 from $1.35 and maintains Hold Rating. Note that the unit price of Ascott Residence Trust (ART) has fallen 13.3% since the high of $1.50 on 22 May 2013 along with the general market pull-back over concerns about an early tapering of the Fed’s QE program. In this context, it is worthwhile highlighting that ART’s gearing has increased from 36% to 41% following the completion of the acquisition of three prime serviced residences in China and a portfolio of 11 rental housing properties in Japan for S$287.4m on 28 June 2013. The new gearing level is high compared to hospitality REIT peers, e.g. 28% for CDLHT and 29% for FEHT, and may be viewed less favorably by investors given an environment of higher interest rates. In addition, expect fairly mute operational performance for ART’s assets in multiple geographies for the rest of the year. Given the increase in risk-free rates.