Investors have also responded with “healthy demand” for the industrial S-REIT’s $500 million equity placement, says Natarajan, with the issue being 4.1 times subscribed.
In total, 202.4 million new units priced at $2.47 apiece will be issued on June 6. The proceeds will be used to partially fund the above acquisitions, with remainder via debt.
According to CLAR, investors include new and existing unitholders, long-only funds, real estate specialists, private wealth and multi-strategy investors.
Gearing post-acquisition and fundraising is expected to be 38%, and management sees this as comfortable, while providing debt headroom for planned redevelopments.
See also: CapitaLand Ascendas REIT to acquire properties in Tai Seng and Science Park Drive for $700 mil
Overall, the transaction is expected to be accretive, at +1.4% to pro forma FY2024 distribution per unit (DPU), says Natarajan. “DPU accretion, however, was slightly capped by larger-than-expected equity funding.”
Natarajan is staying “buy” on CLAR with an unchanged $3.20 target price, inclusive of a 6% ESG premium based on RHB’s proprietary methodology.
In a June 2 note, Natarajan also revised his FY2025 to FY2027 DPU by -2%, 0% and +1% respectively.
See also: CapitaLand Ascendas REIT raises $500 million from private placement at $2.47 per new unit
Other analysts are similarly optimistic about the proposed acquisition. Maybank Singapore analyst Krishna Guha is maintaining “buy” with a $2.95 target price, OCBC Investment Research analysts have a “buy” call with a $3.21 fair value estimate, and Morningstar Equity Research analyst Xavier Lee is maintaining his four-star rating with a $2.90 fair value estimate.
About the assets
CLAR proposed the acquisition of 9 Tai Seng Drive, a Tier-3 co-location data centre completed in 2019 with 30 years left on its lease; and 5 Science Park Drive, a premium business park space completed in 2019 with 56 years remaining on its lease.
9 Tai Seng Drive is being purchased for $455.2 million, at a 2.2% discount to average valuation and a net property income (NPI) yield of 7.1%.
Meanwhile, 5 Science Park Drive will be acquired for $245 million, including a $30 deferred consideration, at a 7% discount to valuation and NPI yield of 5.7%.
Both assets are fully occupied, with a weighted average lease expiries (WALE) of 4.4 years and 1.5 years respectively.
While 5 Science Park Drive has a shorter WALE, the asset is fully occupied by its key tenant Shopee, and CLAR is confident of renewing the lease at higher rental rates, as its current rental is 15% below the market rate.
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In light of this, CLAR has negotiated for $30 million to be paid as a deferred consideration, in November 2026.
Overall, the acquisitions will raise its Singapore exposure to 67% from 65%. The acquisitions are subject to unitholders approval, and likely to be completed by 3Q2025, notes Natarajan.
Natarajan thinks there is “good upside potential” for these data centre assets, with in-place rental at 30% below the market rate.
“In addition, there is strong potential for further rent growth from the tight market vacancy rate of 2% and a very limited supply pipeline. Post-acquisition, CLAR’s data centre exposure will rise to 11% from 8%,” he adds.
As at 4.35pm, units in CLAR are trading 3 cents lower, or 1.1% down, at $2.62. CLAR units are up nearly 0.8% year to date.
