SINGAPORE - Ascendas Real Estate Investment Trust (Reit) on Friday (Nov 1) said it has entered into agreements to acquire 28 business park properties in the US, along with two others in Singapore, from its sponsor CapitaLand for some $1.66 billion.

CapitaLand is also a controlling unitholder of Ascendas Reit, and a controlling shareholder of the Reit manager.

The proposed transactions, which are conditional upon approval of the Reit's independent unitholders and the relevant authorities, are expected to be completed in the fourth quarter this year.

Upon completion, CapitaLand is expected to realise an estimated gain of about $95.4 million.

According to the manager, the proposed acquisitions will complement and strengthen the quality of the 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 per cent to $5.4 billion, and constitute 42 per cent of its total asset value of $12.8 billion, the manager said.

The US properties comprise 28 business park properties located in the US tech cities of Raleigh, Portland and San Diego, with a net lettable area (NLA) of about 310,000 square metres (sq m).

Among other things, acquisition of the US properties would provide further geographical diversification to Ascendas Reit's portfolio and fits with the manager's mandate of investing in developed markets. In addition, the properties represent "attractive market fundamentals" as they are strategically located in tech-driven cities, the manager said.

The US properties will constitute about 10 per cent of Ascendas Reit's total asset value, and the proportion of overseas investment is expected to increase to 28 per cent of total asset value.

As all the US properties sit on freehold land, the proportion of freehold properties from Ascendas Reit's enlarged portfolio's will also rise from 21.9 per cent to 29 per cent.

Closer to home, the two Singapore business park properties are Nucleos and FM Global Centre, which have a NLA of about 50,000 sq m.

Nucleos is located at Biopolis, the biomedical research and development hub at one-north, while FM Global Centre is located at the gateway of Singapore Science Park 2, Singapore's technology corridor for R&D (research and development) and technology development.

The manager is of the view that the Singapore properties would deepen Ascendas Reit's presence in business parks, and strengthen its portfolio by lengthening its average land lease expiry.

It added that the developments would provide income stability, with a high average occupancy rate of 94.6 per cent, and a long WALE (weighted average lease expiry) of 6.9 years, which is longer than the existing Singapore portfolio WALE of 3.6 years as at Sept 30, 2019.

The manager intends to fund the total acquisition cost using net proceeds from a proposed rights issue, a drawdown of loan facilities, and the issuance of the acquisition fee units.

The proposed acquisitions are expected to generate a first-year net property income yield of about 6.3 per cent post-transaction costs.

William Tay, executive director and CEO of the manager, said the properties' strategic locations and strong tenant base will allow the Reit to tap the growing information technology, financial and healthcare sectors. "They are already DPU (distribution per unit) and DPU yield accretive, and we know that they will contribute positively and augment the sustainability of Ascendas Reit's earnings," he added.

Following the acquisitions, Ascendas Reit's pro-forma DPU is expected to increase to 16.136 Singapore cents, from 16.035 cents previously, providing a DPU yield accretion of about 3 per cent.

Lee Chee Koon, group CEO of CapitaLand, said: "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.

"The proposed divestments of the 30 business park properties in the US and Singapore to Ascendas Reit will allow CapitaLand to unlock capital value for reinvestment and redeployment. Moving forward, we will continue to take part in the growth of these quality assets through CapitaLand's stake in Ascendas Reit. CapitaLand will also continue to manage the properties and receive a recurring fee income."

With the proposed acquisitions, Ascendas Reit will own a total of 99 properties in Singapore, 35 properties in Australia, 38 properties in the UK, and 28 properties in the US.

Units of Ascendas Reit closed up two Singapore cents or 0.6 per cent at $3.17 on Thursday, before the results were released. The Reit called for a trading halt on Friday morning, after it had released its financial results.

As at 3.54pm on Friday, CapitaLand shares were trading at $3.64, up 1.1 per cent or four Singapore cents.