Ascendas Real Estate Investment Trust (Reit) plans to buy 30 business park properties in the United States and Singapore from CapitaLand for a total of $1.66 billion.
The Reit's manager said yesterday that the proposed acquisitions will strengthen the quality of the Reit's existing business and science park portfolio.
The transactions, which are conditional upon the approval of the Reit's independent unit holders and the authorities, are expected to be completed in the fourth quarter of this year.
The acquisitions will boost Ascendas Reit's investment in the business and science park segment by 46 per cent to $5.4 billion. The segment will thus constitute 42 per cent of its total asset value of $12.8 billion, the manager said.
CapitaLand, one of Asia's largest diversified real estate groups, is a controlling unit holder of Ascendas Reit as well as a controlling shareholder of the manager.
The US properties comprise 28 business park properties located in the tech cities of Raleigh, Portland and San Diego, with a net lettable area of about 310,000 sq m.
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 total asset value, and the proportion of overseas investment is expected to increase to 28 per cent of total asset value.
As the US properties are on freehold land, the proportion of freehold properties from Ascendas Reit's enlarged portfolio will rise from 21.9 per cent to 29 per cent.
The remaining two business park properties that will be acquired are Nucleos and FM Global Centre in Singapore. They have a net lettable area of about 50,000 sq m.
Nucleos is located in Biopolis, the biomedical research and development hub at one-north in Buona Vista, while FM Global Centre is in Singapore Science Park 2 in Pasir Panjang Road, Singapore's technology corridor for research and technology development.
The manager noted that the Singapore properties will 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, as they have a high average occupancy rate of 94.6 per cent and a long weighted average lease expiry of 6.9 years. This is longer than the Singapore portfolio's weighted average lease expiry of 3.6 years as of Sept 30.
The proposed acquisitions are expected to generate a first-year net property income yield of about 6.3 per cent post-transaction costs.
With the proposed acquisitions, Ascendas Reit will own a total of 99 properties in Singapore, 35 properties in Australia, 38 properties in Britain and 28 properties in the US.
Mr William Tay, executive director and chief executive of the manager, said of the new properties: "Their strategic locations and strong tenant base will allow us to tap the growing information technology, financial, and medical and healthcare sectors."
Following the acquisitions, Ascendas Reit's pro-forma distribution per unit (DPU) is expected to increase to 16.136 cents, from 16.035 cents previously, while aggregate leverage is expected to fall to 34.6 per cent from 36.3 per cent.
Percentage boost in Ascendas Reit's investment in the business and science park segment with the acquisitions - to $5.4 billion.
CapitaLand group chief executive Lee Chee Koon said the group has announced divestments of more than $5.2 billion this year, exceeding its annual divestment target of $3 billion. "By maintaining a disciplined approach to divestment and deleveraging, we are confident of meeting our target net debt to equity ratio of 0.64 by end 2020," he said.
Yesterday, Ascendas Reit also reported a 5.3 per cent rise in gross revenue to $229.6 million for the quarter to Sept 30. This was thanks to the full-quarter contribution from 38 logistics properties in Britain that were acquired between August and October last year.
Ascendas Reit raised its DPU by 2.3 per cent to 3.978 cents, up from 3.887 cents a year ago.
Net property income climbed 12 per cent on the year to $177.9 million for the second quarter, from $158.9 million, in tandem with the higher gross revenue and the effects from the adoption of the new Singapore Financial Reporting Standard 116 since April 1 this year.
Total income available for distribution grew 7.6 per cent year on year to $123.8 million, from $115 million.
Meanwhile, for the half year ended Sept 30, DPU was 1.2 per cent higher at 7.983 cents, versus 7.889 cents a year ago, and total income available for distribution grew 7 per cent to $248.5 million.
The distribution will be paid out on Dec 3.