Ascendas Real Estate Investment Trust has entered into agreements to acquire a portfolio of 30 business park assets in the US and Singapore for S$1.66 billion ($1.22 billion) from its controlling unitholder CapitaLand.
Under the terms of the proposed deal, Ascendas REIT will buy 28 properties in the US and two in in Singapore from wholly owned entities of CapitaLand, according to Ascendas Funds Management, which manages the listed trust.
The sale allows CapitaLand to realise a quick capital gain on a set of US assets acquired last year by Ascendas – Singbridge, which became part of the Temasek Holdings-backed group through a merger completed four months ago. The 28 US properties in the portfolio being transferred to Ascendas REIT represent a set of business park assets which Ascendas – Singbridge had purchased in September 2018 from private equity firm Starwood Capital for a total of $871.5 million, according to property agency reports.
Trading in Tech Properties
“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,” said CapitaLand Group’s CEO Lee Chee Koon.
Lee added that the proposed divestments will allow CapitaLand to unlock capital value for reinvestment and redeployment.
Ascendas REIT has agreed to pay $937.6 million (S$1.29 billion) for the 28 US properties, which are located in the tech hubs of Raleigh, Oregon and San Diego, while the pair of Singapore business parks will change hands for S$380 million.
According to Ascendas Funds Management, the US assets, which offer a combined net leasable area of 310,102 square metres (3.3 million square feet) generate a net property income of S$82.3 million per year, which provides a net property income yield of 6.4 percent for the transaction.
With a weighted average period to lease expiry of 4.2 years, the 28 freehold properties are 94 percent occupied on average, with Google, Amazon and IBM among their tenants, as well as research universities. The assets in Oregon, which is a hub of sports footwear R&D, are home to Nike’s global headquarters, as well as hosting design centres for Adidas and Under Armour.
CapitaLand Sells US Portfolio at a Premium
In an email to Mingtiandi, a CapitaLand spokesperson confirmed that the 28 US properties represent an asset portfolio which Ascendas-Singbridge had purchased from Starwood Capital last year. At the time of that acquisition, Ascendas – Singbridge indicated that it was acquiring 33 assets, however, the spokesperson confirmed that the proposed transfer of the 28 properties constituted the entirety of the portfolio purchased from Starwood Capital.
According to agency reports, the Singapore firm had paid $201.5 million for the Oregon portion of the portfolio, with the San Diego segment of the deal having cost Ascendas-Singbridge another $356 million.
With the company having reportedly paid $314 million for the North Carolina properties, the agency reports show Ascendas-Singbridge having paid a total of $871.5 million for the US assets, or around $66 million less than the price that Ascendas REIT is paying to acquire those properties.
Making a Gain from Biomedical R&D
The pair of Singapore properties include the seven-storey Nucleos biomedical research facility at the Biopolis R&D centre in the One-North business park and the six-storey FM Global Centre on Pasir Panjang Road.
Tenants at the pair of Singapore assets include DuPont, Takeda, and FM Global, with the occupants generating annual passing rent of S$25.3 million, which will earn Ascendas REIT a 6.7 percent NPI yield on the purchase price, according to the REIT manager.
The 49,762 square metres of Singapore office space is said to be 95 percent occupied with a weighted average lease expiry period of 6.9 years.
Ascendas REIT Bulks Up
“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,” said Ascendas Funds Management’s CEO William Tay.
The addition of the properties will bring Ascendas REIT’s assets under management to S$12.8 billion across 200 properties in Australia, the UK, Singapore and the US, while increasing its net leasable area to 4.2 million square feet.
The total acquisition cost, which will include a S$16.6 million acquisition fee and S$23.8 million in stamp duty, will be funded through a proposed rights issue expected to raise S$1.3 billion, S$394.3 million in loan facilities, and S$16.6 million in the issuance of acquisition fee units.
The acquisition, which is conditional upon the approval of Ascendas REIT’s independent unitholders and the relevant authorities, is expected to be completed in the fourth quarter of this year.
Upon completion, CapitaLand said that it expects to book a gain of S$95.4 million on the disposal of the properties.