UPDATE: Ascendas REIT to acquire 30 business park properties in US, Singapore from CapitaLand for S$1.66 billion

The FM Global Centre business park property in Singapore to be acquired by Ascendas REIT; credit: Ascendas REITThe FM Global Centre business park property in Singapore to be acquired by Ascendas REIT; credit: Ascendas REIT

This article was originally published on Friday, 1 November 2019 at 13:09 SGT; it has since been updated to include more details.

Ascendas REIT has entered a deal to acquire 28 U.S. business park properties in the U.S. and two in Singapore for S$1.66 billion from CapitaLand, the REIT said in a filing to SGX Friday.

William Tay, executive director and CEO of the REIT’s manager, said the business parks’ strong locations and tenant bases offered a play on the growing information technology, financial, and medical and healthcare sectors.

“They are already DPU and DPU yield accretive, and we know that they will contribute positively and augment the sustainability of Ascendas REIT’s earnings,” Tay said in the statement.

The REIT also pointed to its foray into the U.S. market as providing further geographical diversification.

The consideration for the U.S. properties will be S$1.29 billion, or around US$937.6 million, the filing said. The properties are located in the U.S. tech hubs of Raleigh, Portland and San Diego, the REIT said, adding they all have a critical mass of established, growth and start-up companies as well as research universities and institutions.

The consideration for the two Singapore properties — Nucleos and FM Global Centre — will be S$380 million, the filing said. Nucleos is located at the Biopolis biomedical research hub at one-north, while FM Global Centre is at Singapore Science Park 2, a technology corridor for research and development, the REIT said.

The REIT said Nucleos and FM Global Centre have long remaining land lease tenures of around 52 years and 73 years, respectively.

“This is a rare opportunity given JTC’s current policy of releasing shorter tenure land plots of between 20 to 30 years under the Industrial Government Land Sales (IGLS) Programme,” the REIT said.

Ascendas REIT said it plans to fund the acquisitions using S$1.29 billion of the net proceeds of a rights issue and the drawdown of loan facilities.

Assuming the acquisitions had been complete on 1 April 2018, the pro forma financial effect of the acquisitions on the previous fiscal year’s distribution per unit (DPU) would have been an improvement of 0.101 Singapore cent, with a DPU yield accretion of around 3 percent, the REIT estimated.

The acquisition is conditional on approval of Ascendas REIT’s unitholders, the filing said.

After the deal is completed, Ascendas REIT’s portfolio will have 99 properties in Singapore, 35 in Australia, 38 in the U.K. and 28 in the U.S.

CapitaLand: Benefits of Ascendas-Singbridge deal

In a separate filing, CapitaLand said its divestment of the properties was expected to be completed in the fourth quarter, and it expected an estimated gain of around S$95.4 million.

“The enlarged CapitaLand portfolio following our combination with Ascendas-Singbridge has provided us with a robust pipeline of quality assets and additional REIT vehicles for recycling assets,” Lee Chee Koon, CEO of CapitaLand, said in the statement.

“This will stand us in good stead to achieve sustainable double-digit return on equity for the group. The proposed divestments of the 30 business park properties in the USA and Singapore to Ascendas Reit will allow CapitaLand to unlock capital value for reinvestment and
redeployment,” Lee added.

 

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