Ascendas REIT Buying 75% of Singapore Tech Park Building From CapitaLand for $400M

Showing continued faith in demand for Singapore office space among corporate giants, Ascendas REIT has agreed to buy the 75 percent stake in a top-end business park property held by its sponsor, and partner in the project, CapitaLand.

The SGX-listed commercial and industrial trust is set to pay S$534.4 million ($400 million) to establish 100 percent ownership in Galaxis, a six-year-old commercial project in the city’s One North tech park which provides much of the office space for the NYSE-listed parent of e-commerce giant Shopee.

“Galaxis is a prime example of the type of assets that Ascendas REIT looks to acquire to achieve a stable, long-term revenue stream,” Beh Swan Gin, chairman of Ascendas REIT’s manager, said in a statement.

The purchase in One North’s Fusionopolis technology cluster is being announced just over two weeks after Blackstone completed its acquisition of the Sandcrawler building — just one minute walk to the east — as more investors bet on large scale enterprises leasing office space in Southeast Asia’s wealthiest city.

Shopee, Oracle and Canon

Through buying out its sponsor’s stake, Ascendas REIT will now be the sole owner of a property which features floor plates measuring 1,740 to 3,867 square metres (18,729 to 41,624 square feet). That large format approach has helped it to attract Shopee parent firm, Sea Ltd, as well as Oracle and Japanese electronics maker Canon.

Ascendas REIT had acquired its existing 25 percent ownership interest in Galaxis from Japan’s Mitsui and Company last year for S$102.91 million.

Located near One-North MRT station, the Green Mark Platinum-rated Galaxis encompasses a 17-storey business park and office tower, a five-storey work lofts building and a two-storey retail podium.

The property’s 60,935 square metres (655,899 square feet) of net lettable area includes 44,556 square metres of business park space, 10,305 square metres of office space, 4,106 square metres of retail and F&B space and 1,968 square metres of work lofts.

Ascendas REIT’s agreed consideration values the 60-year leasehold asset at S$11,816 ($8,847) per square metre of NLA. The occupancy rate as of March was 98.6 percent, and the weighted average lease expiry was 2.4 years.

Big on Large Floorplates

With the acquisition, the trust is expanding its Singapore business and science park holdings by 8.8 percent in terms of NLA, from 689,980 square metres to 750,915 square metres, the manager said. Ascendas REIT’s full ownership of Galaxis will enlarge its business and science park portfolio in Singapore by 18 percent to S$4.9 billion.

Including Galaxis, Ascendas REIT expects to own five properties with a total NLA of 188,225 square metres within One-North, a collection of tech campuses, by the end of 2021.

Coinciding with the acquisition announcement, Ascendas REIT on Wednesday posted notice that it had closed a private placement of 142,664,000 new units at a fixed issue price of S$2.944 per new unit. The private placement was 2.6 times covered and drew strong demand from new and existing institutional, accredited and other investors, the manager said.

About S$240.1 million, or more than half the gross proceeds, will be used to partly fund the Galaxis acquisition, the Business Times reported. The manager anticipates an initial net property income yield of 5.4 percent, or 5.3 percent post-transaction cost, from the Galaxis asset.

Tech Demand

Blackstone announced on 20 April that it had taken possession of the Sandcrawler building, after completing its S$175.8 million purchase of the tech park property from a unit of Disney-owned Lucasfilm through an agreement signed in January.

Singapore’s ability to attract both western multinationals and Chinese tech giants, on top of its growing list of domestic players has boosted rents and bolstered investor interest in office properties in the city, particularly in suburban tech park projects, according to Tricia Song, who leads the research team at Colliers International in the city.

“With new demand driven by the technology sector, CBD Grade A office net absorption turned positive in Q1 2021 after two consecutive quarters of contraction”, Song said in a statement. “This is a sign of recovery, and we can expect rents to rebound 5.5% by end-2021, in line with the GDP growth, as supply stays at benign levels”.

During the first quarter of this year, Bytedance, the Chinese company behind the Tiktok video app, took up another floor at One Raffles Quay South in Singapore and UK appliance maker Dyson agreed to lease 110,000 square feet at St James Power Station.