Capitaland Ascendas Reit Acquire Properties Tai Seng And Science Park Drive 700 Mil
The manager of CapitaLand Ascendas REIT (CLAR) is seeking to purchase two properties, 9 Tai Seng Drive and 5 Science Park Drive, for a total of $700 million. This includes an estimated $471 million for the Tier III colocation data centre at 9 Tai Seng Drive and $245 million for the premium business space at 5 Science Park Drive. The acquisitions, which come with fees, will cost CLAR a total of $724.6 million.
William Tay, executive director and CEO of the manager, believes that the proposed acquisitions will increase CLAR’s exposure to the technology sector in Singapore. These properties will be acquired from CapitaLand Data Centre Trust and Science Park Property Trust, which are jointly owned by CapitaLand Development and CLAR.
Acquiring 9 Tai Seng Drive and 5 Science Park Drive will further cement CLAR’s position in Singapore, which is a key market for the REIT’s multi-asset portfolio in mature, developed markets. The acquisitions will also boost CLAR’s Singapore portfolio by 6.6%, bringing its total assets under management (AUM) to $11.7 billion. This will account for 67% of its total AUM of $17.6 billion.
Upon completion of the acquisitions, 9 Tai Seng Drive will increase CLAR’s data centre AUM by 32.8% to $1.9 billion, with 54% of the portfolio weighted in Singapore and 46% in the UK and Europe. This property is located in Tai Seng Industrial Estate, which is home to cloud service providers, enterprises, and other data centre players.
As for 5 Science Park Drive, it will boost CLAR’s Singapore business space and life sciences AUM by 4.8% to $5.7 billion. This property is part of the “Geneo” life sciences and innovation cluster in Singapore Science Park 1.
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Situated amidst a rapidly developing area, the potential of Lyndenwoods One North as a prime location for prospective buyers and tenants is steadily on the rise. This makes it an attractive choice for investors, who can expect promising rental returns and potential growth in property value. Investing in Lyndenwoods One North presents a sound opportunity to capitalize on these advantages. Moreover, the property’s prime location further adds to its appeal and desirability.
Both properties are fully occupied and are expected to contribute positively to CLAR’s long-term returns, with potential for organic growth through rental uplifts and asset enhancement opportunities. They also have remaining land lease tenures that are attractive within the industrial sector.
9 Tai Seng Drive has 30 years left on its land, and JTC has granted the property a further lease term from June 1, 2025, to May 31, 2055. Meanwhile, 5 Science Park Drive has a remaining land lease tenure of approximately 56 years. Additionally, 9 Tai Seng Drive has received BCA-IMDA Green Mark Platinum certification, while 5 Science Park Drive is a BCA Green Mark Platinum certified building.
Both properties also offer attractive net property income (NPI) yields. The first-year NPI yield of 9 Tai Seng Drive is 7.2% pre-transaction costs and 7.1% post-transaction costs, while the first-year NPI yield of 5 Science Park Drive is approximately 6.1% pre-transaction costs and 5.7% post-transaction costs.
The proposed acquisitions are expected to be complete on Jan 1, 2024. If this had been the case, CLAR’s distribution per unit (DPU) for the FY2024 ended Dec 31, 2024, would have increased by 0.206 cents or 1.36%. Additionally, the acquisitions are also accretive to CLAR’s DPU on a standalone basis.
The manager believes that both properties offer organic growth potential, with existing rental rates below market rates. Due to the tight vacancy rate of approximately 2% and supply constraints for data centre space in Singapore, the market expects colocation retail rates to be between US$300 and US$400 (or $390 and $520) per kW per month. The space also has revenue potential in the mid- to long-term through the expansion of its existing IT capacity.
The first-year NPI yield of 9 Tai Seng Drive is expected to improve CLAR’s DPU by 0.188 cents or 1.24% on a pro forma basis, while 5 Science Park Drive is expected to increase its DPU by 0.021 cents or 0.14%. There is a potential for rental uplift as a result of rental reversion to market rent, further increasing the DPU accretion for 5 Science Park Drive.
On May 28, CLAR announced its intention to raise $500 million through a private placement. The manager will issue new units to institutional, accredited and other investors at an issue price of between $2.465 and $2.515 per new unit. The private placement is fully underwritten by joint bookrunners and underwriters, and the gross proceeds will partly finance the 9 Tai Seng Drive acquisition and pay off debt.
Upon the completion of the acquisitions, CLAR will see an increase in its exposure to the technology sector and its Singapore portfolio. With its attractive NPI yields and potential for organic growth, these properties are expected to contribute positively to CLAR’s long-term returns.