CapitaLand Ascendas REIT deepens presence in one-north, Singapore with acquisition of Seagate’s R&D facility for S$218.2 million
16 May 2023, Singapore – CapitaLand Ascendas REIT Management Limited, as the manager (the “Manager”) of CapitaLand Ascendas REIT (“CLAR”), is pleased to announce the proposed acquisition of The Shugart, an integrated high-specification research and development (“R&D”) facility and business park property (the “Property”) from Seagate Singapore International Headquarters Pte Ltd (“Seagate Singapore” or the “Vendor”) (the “Proposed Acquisition”). The Property is situated at 26 Ayer Rajah Crescent in the one-north district in Singapore. The purchase consideration for the Proposed Acquisition is S$218.24 million (the “Purchase Consideration”).
Mr William Tay, Chief Executive Officer and Executive Director of the Manager, said: “The acquisition of Seagate’s Singapore R&D facility is a strategic fit with our existing portfolio. Singapore remains one of our core markets and we are scaling up our presence with a highly sought-after asset in the heart of the R&D and technology district at one-north. The Proposed Acquisition is a continuation of our value creation efforts to grow CLAR’s portfolio with good quality assets that have long-term growth potential and income stability. This acquisition involves the leaseback of the property to Seagate for 10 years, with an option for an additional 10 years, which will generate an attractive long-term stable return.”
Rationale and Merits of the Proposed Acquisition
1. Further expands CLAR’s footprint in one-north
CLAR currently has five assets in various clusters in the one-north district, namely, Nexus @one-north, Galaxis, Grab Headquarters, Neuros & Immunos and Nucleos with a total AUM of S$1.7 billion and net lettable area of 2.0 million sq ft[1]. These clusters cater to the infocomm technology, media, science and engineering, biomedical and life sciences and emerging industries. Upon completion of the Proposed Acquisition, CLAR’s footprint in the one-north district will increase by 13% to S$1.9 billion (AUM) and by 21% to 2.5 million sq ft (NLA).
This enlarged footprint in the one-north district further enhances CLAR’s presence in the resilient business park sector in Singapore where it is the largest operator, positioning CLAR to further strengthen both its portfolio and tenant base. The Proposed Acquisition is in line with CLAR’s strategy to invest in properties that cater to the evolving market requirements arising from structural trends and consumption patterns such as digitalisation and e-commerce.
Upon completion, on a pro forma basis[1], the proportion of Business Space and Life Sciences properties will increase to 49% (S$8.1 billion) of CLAR’s total investment properties valued at S$16.7 billion.
2. Strategic location in Singapore’s key R&D district
The Property is situated in the Ayer Rajah cluster of the one-north district in Singapore. The one-north district was developed by JTC Corporation as a research and innovation business hub fostering R&D and high-technology activities in biomedical and life sciences, infocomm technology, media, science and engineering. Established as the epicentre of Singapore’s knowledge-based economy, it is home to a large concentration of world-renowned multinational and local technology firms such as Sea Group, Grab, Equinix, ST Telemedia, and Razer.
The Property is centrally located with a four-minute drive to the Ayer Rajah Expressway and a 15-minute drive to the Central Business District. It is also a convenient 10-minute walk to the one-north MRT station (Circle Line) with a connecting shuttle bus service to the Buona Vista MRT station (interchange of East-West and Circle Lines) and the one-north MRT station.
3. High quality business park property
The Property comprises a six-storey podium and a nine-storey tower. Its specifications include R&D, cleanroom and data centre space for Seagate Singapore’s operations. Other features include a sky garden, multi-purpose sports hall and gymnasium for its employees. The Property serves as Seagate’s primary R&D location outside the United States.
Supported by a fast-growing demand for innovative storage products and services by enterprises, Seagate is one of the largest mass data storage providers. It is a market leader in data storage technologies and a dominant player in the hard disk drive and systems product market.
Seagate's R&D facility was newly built about eight years ago.
4. Fully occupied with a 10-year lease by Seagate with an additional 10-year renewal option
Upon completion of the Proposed Acquisition, Seagate Singapore, a wholly-owned subsidiary of Seagate Technology Holdings plc, a leading provider of data storage technology and infrastructure solutions group listed on Nasdaq, will enter into a 10-year leaseback of the Property’s entire gross floor area, with the option to renew for an additional 10 years.
The long lease term of 10 years with built-in rent escalation of 2.5% p.a. will provide income stability and resilience to the portfolio.
The fully occupied Property with its weighted average lease to expiry (“WALE”) of 10 years will uplift the overall portfolio WALE from 3.8 years to 3.9 years on a pro forma basis[1].
5. Distribution per Unit (“DPU”) accretive acquisition
The first year net property income (“NPI”) yield[2] of the Proposed Acquisition is approximately 8.3% and 7.8% pre-transaction costs and post-transaction costs, respectively.
The pro forma impact on the DPU for the financial year commencing on 1 January 2022 and ended 31 December 2022 (FY2022) is expected to be an improvement of approximately 0.110 Singapore cents or a DPU accretion of 0.70%, assuming the Proposed Acquisition was completed on 1 January 2022[3].
Details of the Proposed Acquisition
On 15 May 2023, HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of CLAR (the “Trustee”), has entered into a Call and Put Option Agreement with the Vendor to acquire the Property.
The Purchase Consideration of S$218.24 million was negotiated on a willing-buyer and willing-seller basis and is at a 5.1% discount to the independent market valuation[1] of the Property of S$230.0 million as of 31 March 2023.
The total cost of the Proposed Acquisition is estimated to be approximately S$232.4 million comprising (i) the Purchase Consideration of S$218.24 million, (ii) the acquisition fee payable to the Manager of approximately S$2.18 million (being 1% of the Purchase Consideration), and (iii) stamp duty, professional and other fees and expenses of approximately S$12.0 million.
The Proposed Acquisition is expected to be completed in the second quarter of 2023.
Upon completion of the Proposed Acquisition, CLAR will own 231 investment properties comprising 98 properties in Singapore, 36 properties in Australia, 48 properties in the United States, and 49 properties in the United Kingdom/Europe.
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1. As at 31 December 2022.
2. The NPI yield is derived using the estimated NPI expected in the first year after the Proposed Acquisition.
3. The estimated pro forma DPU impact is calculated based on the following assumptions a) CLAR had completed the Proposed Acquisition on 1 January 2022, and held and operated the Property through 31 December 2022, b) the Proposed Acquisition was funded based on a funding structure of 40% debt and 60% equity, and c) the Manager elects to receive its base fee 80% in cash and 20% in units.
4. In accordance with the requirements of Appendix 6 of the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore, the Manager and the Trustee have commissioned Jones Lang LaSalle Property Consultants Pte Ltd to carry out a valuation of the Property as at 31 March 2023 using the discounted cashflow analysis and income capitalisation approaches.