SINGAPORE'S Ascendas Real Estate Investment Trust (A-REIT) will spend S$270 million building new industrial facilities in the coming months as it shifts focus to development rather than acquisitions.

Chief Executive Tan Ser Ping said A-REIT's ability to create new assets would allow it to stay on track to increase its portfolio to S$5 billion by 2010 even as acquisition opportunities shrink.

'When there are good acquisition opportunities we will go for them. But if there are none, we're not going to cry. There are other things to do,' he said in an interview on Tuesday.

Asset acquisitions have helped drive returns for most of Singapore's 16 listed property trusts, but A-REIT faces increasing competition from other industrial-property trusts such as Mapletree Logistics, Cambridge Industrial and MacathurCook Industrial.

Singapore listed REITs are allowed to hold up to 10 per cent of their total assets in development and A-REIT could maximise that limit if it needs to, Mr Tan said.

'We widened our investment strategy about a year ago to include more development projects. We have a strong pipeline,' he added.

A-REIT could have one more acquisition this year to bring its total investment for the financial year to about S$400 million, Mr Tan said.

Singapore focus
He sees strong returns ahead from its business-parks segment, which generates about a quarter of revenue.

Consultancy Jones Lang LaSalle said last week rents for office space in Singapore business parks would likely rise 25 per cent in the next two years, driven by demand for cheaper space after central office rents more than doubled in the past year.

'We expect this trend to be sustained,' Mr Tan noted.

Unlike competitors who position themselves as REITs based on regional industrial assets, A-REIT is very much Singapore-focused. Its portfolio of 78 business and industrial properties - valued at S$3.3 billion as of end June - is entirely located in Singapore.

The country's third-largest property trust by market value is unlikely to buy overseas assets because that would affect its cost of borrowing and change its risk profile, Mr Tan said.

'Right now, we are very much focused on consolidating our position in Singapore,' he added.

Last month, A-REIT's main shareholder, government-owned Ascendas, listed Ascendas India Trust , a business trust based on Indian business parks.

'For markets such as India where you have the depth and width of potential, it's better to have separate geographically focused vehicles,' Mr Tan said.

Units of A-REIT have risen 8 per cent in the last three months to offer a dividend yield of 5 per cent. This contrasts with another government-linked REIT, Mapletree Logistics, whose units have risen 17 per cent to yield 4.7 per cent. -- REUTERS