Singapore’s CapitaLand announced early Monday that it had agreed to buy a controlling stake owned by Temasek Holdings in fellow government-backed developer Ascendas-Singbridge in a deal which would value the target company at S$11 billion ($8.13 billion).
CapitaLand has agreed to pay the equivalent of $6 billion ($4.4 billion) to buy Temasek’s shares in Ascendas-Singbridge giving the buyer, which is also controlled by the state-run investment fund, control over its smaller stablemate and creating a single umbrella group with assets under management of S$116 billion.
The acquisition would give CapitaLand, already Southeast Asia’s largest real estate company, control over Ascendas-Singbridge’s portfolio of commercial and industrial assets in 11 countries, as well as the management companies for its three affiliated trusts. Following the acquisition, CapitaLand would become Asia’s largest real estate company and would instantly rank among the ten largest real estate investment managers in the world.
Singapore Players Combine to Boost Global Presence
“As CapitaLand continues its leadership in residential, retail and lodging, the combined platforms will give us capabilities across the commercial/business space value chain, while adding a strong foothold in logistics and business parks,” Lee Chee Koon, President and Group CEO of CapitaLand said in a statement. “Geographically, the deal strengthens CapitaLand’s presence in our core markets of Singapore and China, while adding meaningful scale in India, US and Europe.”
Following completion of the deal the enlarged CapitaLand would have a business spanning more than 180 cities across 32 countries.
Lee also highlighted the opportunity for CapitaLand to expand its fund management business through the acquisition. Post-merger CapitaLand would be the manager of the three largest real estate investment trusts (REITs) listed on the Singapore Exchange adding Ascendas Real Estate Investment Trust, to the company’s CapitaLand Mall Trust and CapitaLand Commercial Trust.
“As Asia’s leading integrated business space and innovative urbanisation solutions provider, ASB’s rapidly growing business is highly complementary to CapitaLand’s,” Wong Kan Seng, chairman of Ascendas-Singbridge Pte Ltd and former deputy prime minister of Singapore, said in a statement, referring to his company by its acronym. He added that, “The greater benefits to be reaped through cross pollination across asset classes and geographies will create a strong and thriving platform for the Group’s future growth.”
JP Morgan and WongPartnership are acting as sole financial advisor and legal counsel to CapitaLand respectively, while Allen & Gledhill LLP is acting as legal counsel to ASB.
Temasek Continues to Consolidate Real Estate Operations
Under the terms of the agreement, CapitaLand is paying half cash and half stock to acquire Ascendas Pte Ltd and Singbridge Pte Ltd, the holding companies that control Ascendas-Singbridge’s fund management, development and other activities.
Ascendas holds the company’s business park, and industrial development business as well as its fund management platform, while Singbridge holds the group’s joint ventures for large scale urban development projects. CapitaLand is providing the stock compensation by issuing new shares at S$3.50 each, or 11.3 percent more than the company’s average volume-weighted share price of S$3.1447 over the past month.
By accepting CapitaLand shares as payment, Temasek will boost its holdings in the developer from a controlling 40.8 percent to a majority 51 percent following the transaction. The deal is still subject to approval by CapitaLand’s independent shareholders at an Extraordinary General Meeting expected to be convened during the first half of 2019, with Temasek and its affiliates, as interested parties, not allowed to weigh in. The deal will also require regulatory approval.
According to the statement from CapitaLand, the valuation for the acquisition is based on the net asset value of Ascendas-Singbridge, as well as on the trading prices for the three listed trusts sponsored by the group.
Buying a Business Park Specialist
In Singapore, Ascendas-Singbridge’s operations have centred around development and leasing of business parks, with the company having been created from the merger of four real estate and engineering subsidiaries of the government’s Jurong Town Corporation and Temasek in 2015 in a deal which valued the combined enterprise at S$5 billion.
Ascendas, a business park development specialist, had been an early entrant into the China market, having established projects in Shanghai, Suzhou, Dalian and other cities and also has been active in downtown office markets, including selling the Ocean Towers project on Shanghai’s Yan’an Lu to an ARA Asset Management fund in 2013 for a reported RMB 1.9 billion.
Ascendas-Singbridge’s Growing Footprint
In June of 2018 Ascendas-Singbridge Group teamed up directly with Temasek to launch a S$400 million investment programme to develop a portfolio of as much as 15 million square feet (1.39 million square metres) of industrial real estate projects in India. Then, in July of last year, Ascendas REIT made its first investment in Europe, buying 12 logistics assets in the UK for £207 million (then $272 million).
The company moving into another fresh market in September when Ascendas-Singbridge acquired a portfolio of 33 grade A office properties in the US from Starwood Capital, giving the company its first assets in the US.
Dubbed “The Innovation Collection” by Starwood, the set of commercial assets is estimated to be worth $1 billion, has a total net lettable area of 3.3 million square feet and an average occupancy rate of 95 percent, according to an offering document obtained by Mingtiandi.
In total, more than 80 percent of Ascendas-Singbridge’s assets are composed of office properties. Following the merger, the combined company will hold a portfolio of 83 office properties across ten countries, with a total gross floor area of about 27 million square feet (2.5 million square metres).
In addition to development work, the group manages a trio of Singapore-listed trusts including Ascendas Real Estate Investment Trust, Ascendas India Trust and Ascendas Hospitality Trust.
CapitaLand itself was formed in 2000 by the merger of Pidemco Land and DBS Land and is involved in development, private equity fund management, REIT management and other aspects of the real estate sector. According to its website CapitaLand had a global portfolio worth over S$92 billion as of 30 September 2018, including integrated developments, shopping malls, lodging, offices, homes, real estate investment trusts (REITs) and funds.