Sabana Reit to sell data centre to Ascendas-Singbridge

The $99.6m deal is in line with strategy to recycle capital and optimise portfolio returns

Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) is selling a data centre in Tai Seng to the Ascendas-Singbridge Group.

The manager said the move fits its strategy of divesting underperforming and mature assets.

A conditional sale and purchase agreement was signed on Wednesday to sell Geo-Tele Centre for $99.6 million. Ascendas-Singbridge said yesterday that it was the buyer.

The purchase price, to be paid in cash, is $60 million higher than the book value of the six-storey property at 9 Tai Seng Drive as at June 30, based on an independent valuation commissioned by Sabana Reit's manager.

Ascendas-Singbridge said the acquisition is part of its efforts to grow its data centre portfolio. It plans to carry out renovations that will be completed in early 2020.

Mr Kelvin Fong, managing director of the group's data centre business, said in a statement that the property is "an attractive asset with a strategic location", with the group "looking at opportunities to ride on this trend" of demand for data centres in Singapore.


Proceeds from the sale of Geo Tele Centre will go to the repayment of Sabana Reit's borrowings and could also be redeployed for projects such as redevelopments or acquisitions. PHOTO: SABANA REAL ESTATE INVESTMENT MANAGEMENT

Proceeds from the sale will go to the repayment of Sabana Reit's borrowings and could also be redeployed for projects such as redevelopments or acquisitions, said the manager.

The deal is in line with a strategy to recycle Sabana Reit's capital and optimise portfolio returns for unit holders, the manager added, noting that the property's plot ratio of 2.5 has been fully utilised.

Geo-Tele Centre has a gross floor area of 218,905sq ft, with 37 years left on the tenure of the land.

For illustrative purposes, the pro forma financial effects of the divestment would have lifted fiscal 2017 distribution per unit to 3.49 cents, from the actual payout of 3.31 cents, had the divestment been done on Jan 1, 2017, said the manager.

Net tangible assets would have stood at 60 cents a unit, instead of 54 cents, while the Reit's aggregate leverage ratio could have been brought down from 38.2 per cent to 29.3 per cent.

Conditions for the sale include regulatory approval from JTC Corp and other relevant authorities.

Ascendas-Singbridge said the acquisition is part of its efforts to grow its data centre portfolio. It plans to carry out renovations that will be completed in early 2020.

A deposit of 10 per cent of the sale amount will be paid into an escrow account, and the rest will come once the divestment is completed - a deadline expected early next year.

Sabana Reit units closed up two cents or 4.7 per cent to 44 cents yesterday.

A version of this article appeared in the print edition of The Straits Times on September 28, 2018, with the headline 'Sabana Reit to sell data centre to Ascendas-Singbridge'. Print Edition | Subscribe