The new facility, at Seletar Aerospace Road 1, will offer scheduled and unscheduled maintenance, modifications, avionics installations, and 24/7 aircraft-on-ground support. The facility will also support aircraft recompletion activities, including paint and interior finishing.
Construction is scheduled to commence later this year and the new facility should be operational starting in the second half of 2028.
Boustead Singapore, which is backing UI Boustead REIT, lists on its website the Bombardier Aerospace Singapore Service Centre (Phase 2) as one of the development projects it is undertaking.
Just prior to Bombardier's announcement, UIBREIT had on May 22 announced it is developing a build-to-suit integrated aerospace facility at the SAP with NLA of 252,113 sq ft and development value of $104 million. The REIT holds a 51% stake in the co-development, while Boustead Singapore owns the remaining 49% stake.
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When completed, the facility will be fully leased to a "leading global aerospace corporation", says UIBREIT, on a triple net basis for 22.5 years with built-in rental escalations at 2-3%.
The development provides yield on cost of 8.6%, which is 120bp above UIBREIT’s projected FY2027 NPI yield of 7.4% for its Singapore portfolio, says Koh.
He estimates that UIBREIT's exposure to the high-value automotive, aerospace & avionics sector is expected to expand from 19.3% to 22.1% of rental income.
According to Koh, this project will be UIBREIT’s fourth property within SAP.
Upon completion, the development will increase UIBREIT’s footprint in SAP to NLA of over 581,000sf, strengthening its position within the government-supported aerospace ecosystem.
For context, Singapore contributes 10% of the global MRO output and 20% of the world’s engine MRO output, says Koh. "UIBREIT will benefit from the growth of its aerospace tenants in Singapore," he adds.
Further upside may come from UIBREIT's option to buy over the remaining 49% stake in the Seletar Aerospace Road 1 JV from its sponsor.
Koh sees positive signals from other existing tenants of UIBREIT. For one, engine maker Safran has announced a JV with SIA Engineering to set up a full-fledged CFM LEAP engine workshop in Singapore to provide engine MRO services for its LEAP-1A and LEAP-1B engines. Safran will hold a 51% equity stake in the JV, with SIA Engineering owning the remaining 49%.
The JV plans to build a new state-of-the-art engine MRO facility in Singapore, says Koh.
Koh notes that Safran now leases two UIBREIT properties: 11 Seletar Aerospace Link and 26 Changi North Rise. According to Koh, UIBREIT could explore the potential expansion of 26 Changi North Rise due to the step up in Safran's activity level.
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"The contemplated AEI could increase the overall GFA from 65,000sf to 117,000sf, about 1.8 times the original size," he estimates. Koh, citing an attractive DPU yield of 9% for FY2027 and 8.8% for FY2028, has maintained his "buy" call on this counter, along with a target price of $1.17.
In contrast, CapitaLand Ascendas REIT's yield is estimated to be 5.9% and AIMS APAC REIT's 6.3%.
Possible catalysts, according to Koh, include resilient growth across the business parks, hi-tech buildings, life sciences, logistics and data centre segments, as well as contributions from development projects, redevelopment projects and AEIs. UI Boustead REIT as at 4.50 pm, traded at 82 cents, up 3.16% for the day. Its IPO in March was priced at 88 cents.
