Ascendas Reit’s proposed acquisition of 30 business park properties in the US and Singapore for S$1.66 billion
Ascendas Reit’s proposed acquisition of 30 business park properties in the United States and Singapore for S$1.66 billion
Complementary and provides diversification to Ascendas Reit’s existing portfolio
Maiden US investment in tech-cities of San Diego, Raleigh and Portland
Quality tenants in technology and healthcare sectors
A DPU and DPU yield accretive transaction
Singapore, 1 November 2019 – Ascendas Funds Management (S) Limited (the Manager), the manager of Ascendas Real Estate Investment Trust (Ascendas Reit) is pleased to announce the proposed acquisitions of a portfolio of 28 business park properties located in the United States (US) (the US Properties) (the US Acquisition) and two business park properties located in Singapore (the Singapore Properties) (together the Proposed Acquisitions) for S$1.66 billion (Total Purchase Consideration). The vendors of the Proposed Acquisitions are indirect wholly-owned entities of CapitaLand Limited, who is a controlling unitholder of Ascendas Reit and a controlling shareholder of the Manager.
Mr William Tay, Executive Director and Chief Executive Officer of the Manager said, “We are really excited to acquire these properties in the US and Singapore. Their strategic locations and strong tenant base will allow us to tap into the growing information technology, financial, and medical and healthcare sectors. They are already DPU and DPU yield accretive, and we know that they will contribute positively and augment the sustainability of Ascendas Reit’s earnings.”
Summary of the Proposed Acquisitions
As at 30 September 2019
Purchase Consideration1 (S$m)
Total Acquisition Cost3 (S$m)
Number of Properties
Net Lettable Area (sq m)
Net Property Income Yield (pre-transaction cost) (%)
Colliers International Consultancy & Valuation (Singapore) Pte Ltd (Colliers): 392.0
Occupancy Rate (%)
Weighted Average Lease to Expiry by Gross Rental Income (years)
Weighted Average Land Lease to Expiry (WALE) (years)
The Proposed Acquisitions will complement and strengthen the quality of Ascendas Reit’s existing business and science park portfolio. With the acquisitions, Ascendas Reit’s investment in the business and science park segment will be boosted by 46% to S$5,407 million and will constitute 42% of total asset value of S$12.8 billion.
The US Properties
The US Properties comprises 28 business park properties located in the US tech-cities of Raleigh, Portland and San Diego. These cities are ranked among the top ten US cities by technology sector contribution in 2018, placing fifth, seventh and ninth, for Raleigh, Portland and San Diego respectively5. All three cities house a critical mass of established, growth and start-up companies as well as top research universities and institutions, contributing to the vibrant innovation ecosystems. Net absorption has been robust and asking rents have risen between 30% to 40% since 2010 in these cities6.
The US Properties will provide further geographical diversification to Ascendas Reit’s portfolio. The proportion of overseas investment (by asset value) is expected to increase to 28% of total asset value of S$12.8 billion. The US Properties will constitute about 10% of total asset value.
As all the US properties are sited on freehold land, Ascendas Reit’s enlarged portfolio’s proportion of freehold properties (by asset value) will be boosted from 21.9% to 29.0%7.
Investment grade tenants within the US Properties include CareFusion Manufacturing, TD Ameritrade, Oracle and Nike.
The Singapore Properties
The two Singapore business park properties are Nucleos and FM Global Centre. Nucleos is located at Biopolis, the biomedical research and development hub at one-north which hosts a cluster of world-class research facilities. FM Global Centre is located at the gateway of Singapore Science Park 2, Singapore’s technology corridor for R&D and technology development.
These properties have a long average remaining land lease to expiry of 56.7 years, which will lengthen Ascendas Reit’s portfolio weighted average land lease to expiry (excluding freehold properties) from 44.1 years to 44.6 years as at 30 September 2019.
In addition, the properties have a high average occupancy rate of 94.6% and a long WALE of 6.9 years. Income stability from these properties are underpinned by the high-quality tenants such as DuPont, Takeda and FM Global.
Funding and Pro Forma Impact
The Manager intends to fund the Total Acquisition Cost of S$1,705.7 million using the net proceeds from the proposed rights issue8 (the Rights Issue), a drawdown of loan facilities, and the issuance of the Acquisition Fee Units.
The pro forma financial effect of the Proposed Acquisitions on FY18/19 distribution per Unit (DPU) would be an improvement of 0.101 Singapore cents9, providing a DPU yield accretion of approximately 3.0%10.
Aggregate leverage is expected to improve from 36.2% as at 30 September 2019 to 34.6%.
The Proposed Acquisitions are expected to generate a first year net property income yield of approximately 6.5% pre-transaction costs (6.3% post-transaction costs).
For the US Acquisition, the Manager plans to eventually achieve a natural hedge by funding 100% of the US assets with US debt liabilities. The expected net income cash flow will be hedged via appropriate hedging instruments. The Manager will continue to manage Ascendas Reit’s interest rates exposure at the portfolio level, and will be guided by the existing policy of maintaining 50% to 90% of borrowings on fixed interest rates.
Ascendas Reit intends to appoint the existing third party property managers in the US to manage the daily operational requirements of the US Properties to maintain continuity. A subsidiary of CapitaLand Limited will be appointed as the asset manager to provide certain asset management and other related services.
The Manager will continue to take a proactive approach to customer service, leasing and property management to mitigate operational risks.
With the Proposed Acquisitions, Ascendas Reit will own a total of 99 properties in Singapore, 35 properties in Australia, 38 properties in the United Kingdom and 28 properties in the United States.
1 The purchase consideration of the US Properties takes into account the US Agreed Portfolio Value as defined in the announcement titled “Proposed acquisitions of a portfolio of United States properties and two Singapore properties”, dated 1 November 2019.
2 All conversions from United States Dollar amounts to Singapore Dollar amounts in this press release are based on the exchange rate of US$1.0000:S$1.3708.
3 Includes acquisition fee and other transaction costs (excluding costs of the Rights Issue (as defined herein)). In accordance with Ascendas Reit’s trust deed, the Manager is entitled to receive an acquisition fee of 1% of the US Agreed Portfolio Value and the purchase consideration of the Singapore Properties. The acquisition fee is payable in Units (Acquisition Fee Units).
4 Valuations are as at 1 September 2019 and are commissioned by HSBC Institutional Trust Services (Singapore) Limited (Trustee of Ascendas Reit) and the Manger, respectively. JLL and Newmark Knight Frank carried out the valuations using the capitalisation approach, discounted cashflow analysis and direct comparison method. CBRE used the capitalisation approach and discounted cashflow method. Colliers used the capitalisation approach, discounted cashflow analysis and direct comparison method.
5 Source: CompTIA Cyberstates 2019
6 Source: Cushman & Wakefield
7 Takes into account the US Properties and the Singapore Properties.
8 Please refer to the announcement on 1 November 2019, titled “Launch of S$1,300 million Rights Issue” for further details.
9 The pro forma DPU (for FY18/19) is calculated based on the following assumptions 1) Ascendas Reit had completed the Proposed Acquisitions on 1 April 2018, held and operated all the properties for the whole of the financial year ended 31 March 2019, 2) the Proposed Acquisition was funded by proceeds from the proposed issuance of Rights Units, drawdown of loan facilities and the issuance of Acquisition Fee Units, 3) the Manager elects to receive its base fee 80% in cash and 20% in units.
10 Pre-acquisition DPU yield is computed based on closing price per Unit of S$3.17 on 31 October 2019 and post-acquisition DPU yield is computed based on the theoretical ex-right price per Unit of S$3.0955.