"Its gearing remains modest, and we see the potential for opportune divestments as well as selective acquisitions. Interest cost pressures have likely peaked," he adds.
CLAR's latest property, 1 Science Park, received its TOP in early March and 76% of a total 1.1 million sqf of NLA has been committed, with advanced negotiations on another 19%.
This property is 34% held by CLAR with CapitaLand Development holding 66%. The property was redeveloped for $883 million and has a long remaining land tenure of around 55 years.
Natarajan estimates stabilised NPI yields from the redevelopment to be at mid-6%, which is higher than its existing portfolio yield of 6%.
"CLAR could also acquire the remaining stake in the asset once stabilised, and further strengthen its Singapore market exposure," he adds.
There is another potential angle for this REIT. Natarajan believes that there is potential to unlock value from Singapore data centre assets, specifically, Telepark.
This property, valued at $270 million, is expected to be vacated by April and has an underlying higher-value commercial land lease, presenting value-unlocking potential via redevelopment.
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"We believe CLAR may divest the asset instead at a premium, and use the proceeds to fund ongoing redevelopments," says Natarajan, referencing CLAR's track record where it divested four logistics assets for $177 million at a 38% premium above the latest valuation in FY2024.
Meanwhile, Natarajan believes that CLAR's portfolio is relatively shielded from ongoing tariff war and that positive rent reversions to continue in FY2025, while occupancy rates could soften slightly.
Singapore accounts for two-thirds of its assets by value, with around 50% in the business park and life sciences segment, and the remainder in the industrial/logistics segment.
While industrial demand could slow down, CLAR’s diversified profile of 96 assets in strategic locations will likely mitigate the impact.
Meanwhile, in the US, which constitutes 11% of CLAR's asset value, the majority of its assets are in business spaces and life sciences, which could benefit from President Donald Trump’s emphasis on boosting domestic industries.
In Australia and UK plus Europe, 13% and 10% respectively, the assets are mainly in the data centre and logistics segments, which we expect to be less impacted.
Natarajan has kept his earnings estimates for CLAR unchanged, with 2% growth in distribution per unit expected this year.
