Capitaland Ascendas Reit Acquire Properties Tai Seng And Science Park Drive 700 Mil
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The manager of CapitaLand Ascendas REIT (CLAR) has announced its plans to acquire two properties in Singapore at a total purchase price of $700 million. This includes the estimated cost of $471 million for the acquisition of 9 Tai Seng Drive, a Tier III colocation data centre, and $245 million for 5 Science Park Drive, a premium business space property. These acquisitions are expected to cost CLAR a total of $724.6 million, including the necessary fees.
CLAR’s manager believes that these proposed acquisitions will deepen the REIT’s exposure to the technology sector in Singapore. 9 Tai Seng Drive will be acquired from CapitaLand Data Centre Trust and Science Park Property Trust, jointly owned by CapitaLand Development and CLAR.
“The acquisitions of 9 Tai Seng Drive and 5 Science Park Drive further anchor CLAR in Singapore, which is a key component of CLAR’s multi-asset portfolio in mature, developed markets,” says William Tay, the executive director and CEO of the manager.
The URA Master Plan has put forth an ambitious vision for the future of Penrith, one that extends to the surrounding areas as well. Tanglin Halt is set to be redeveloped, while Bukit Merah and Alexandra districts are planned for future development. These changes will bring about new mixed-use developments, public spaces, and parks, resulting in a more vibrant and well-connected neighborhood. With the integration of green spaces and pedestrian-friendly streets, residents of Penrith and its neighbouring areas can expect to enjoy a more pleasant living environment and engage in outdoor activities. Adding to the appeal of Penrith is its close synergy with the surrounding districts, fostering a well-balanced and bustling community. As we look towards the future, the emergence of Penrith Guocoland will certainly elevate the appeal of this already desirable location.
Upon completion of these acquisitions, the value of CLAR’s Singapore portfolio will increase by 6.6% to around $11.7 billion, accounting for 67% of its total assets under management (AUM) of $17.6 billion.
In particular, the acquisition of 9 Tai Seng Drive will expand CLAR’s data centre AUM by 32.8% to $1.9 billion, with 54% of its portfolio now being in Singapore and 46% in the UK and Europe. Two of CLAR’s existing data centre properties, Kim Chuan Telecommunications Complex and 38A Kim Chuan Road, are located just five minutes away from 9 Tai Seng Drive. All three properties are situated in Tai Seng Industrial Estate, which is home to various cloud service providers, enterprises, and other data centre players.
Furthermore, the acquisition of 5 Science Park Drive will increase CLAR’s Singapore business space and life sciences AUM by 4.8% to approximately $5.7 billion. This property is part of the “Geneo” life sciences and innovation cluster in Singapore Science Park 1, which also includes the recently developed business space property 1 Science Park Drive. CLAR currently owns a 34% stake in 1 Science Park Drive.
Both 9 Tai Seng Drive and 5 Science Park Drive are fully leased, providing stable income streams and increasing CLAR’s occupancy rate. 9 Tai Seng Drive is fully committed to “well-established end users in the digital, e-commerce, and financial services industries” and has a weighted average lease expiry (WALE) of 4.4 years by revenue as of May 15. 5 Science Park Drive is fully occupied by Shopee, a business segment of NYSE-listed Sea.
In addition, both properties have “attractively long” remaining land lease tenures within the industrial sector. 9 Tai Seng Drive has 30 years left on its land lease, which has been extended by JTC until May 31, 2055. 5 Science Park Drive has a remaining land lease tenure of approximately 56 years. Moreover, both properties have received prestigious green certifications – 9 Tai Seng Drive has achieved the BCA-IMDA Green Mark Platinum certification, while 5 Science Park Drive is a BCA Green Mark Platinum certified building.
According to CLAR, both properties offer attractive net property income (NPI) yields. The first-year NPI yield for 9 Tai Seng Drive, based on the current colocation agreements in place, is estimated to be 7.2% (pre-transaction costs) and 7.1% (post-transaction costs). Similarly, the first-year NPI yield for 5 Science Park Drive is approximately 6.1% (pre-transaction costs) and 5.7% (post-transaction costs). This excludes the deferred consideration of $30 million for 5 Science Park Drive, payable in November 2026 when the existing lease term ends. There is also potential for rental growth due to rental reversion to market rent, according to CLAR.
Furthermore, if the proposed acquisitions had been completed on January 1, 2024, CLAR’s distribution per unit (DPU) for the fiscal year 2024 (ended December 31, 2024) would have increased by 0.206 cents or 1.36% on a pro forma basis. Moreover, the acquisitions of both properties are also expected to be accretive to CLAR’s DPU on a standalone basis.
CLAR’s manager also anticipates organic growth opportunities within both properties. For example, the existing colocation agreements at 9 Tai Seng Drive were contracted with end users between 2022 and 2025 at rates approximately 30% below the current market colocation rates.
Likewise, 5 Science Park Drive has substantial growth potential, with its existing rent 15% below the current market rates in one-north and the Singapore Science Park 1 districts. Furthermore, with only 1.5 years left on the lease, there is a potential for organic growth through rental uplift when the lease ends in 2026, due to limited availability and supply of business space in these districts.
As of May 15, 9 Tai Seng Drive is valued at $465.5 million, while 5 Science Park Drive has a valuation of $263.5 million. These numbers are based on independent valuations by Jones Lang LaSalle Property Consultants and Savills. The acquisitions will be deemed as an interested person transaction (IPT) under SGX’s listing rules.
To finance the cost of these acquisitions, CLAR intends to raise $500 million through a private placement and debt financing. Under the private placement, CLAR will issue new units to institutional, accredited, and other investors at an issue price of $2.465 to $2.515 per new unit. The private placement is fully underwritten by Citigroup Global Markets, DBS Bank, and United Overseas Bank (UOB), and the gross proceeds will be used to partially finance the acquisition of 9 Tai Seng Drive, pay off existing debt, and cover fees and expenses.
Units in CLAR last traded at $2.61 before its trading halt on the morning of May 28.