CapitaLand Ascendas REIT (CLAR) plans to acquire three properties in Singapore from a Warburg Pincus-Lendlease Global joint venture for $565.8 million, which is at a discount of 3.9% off the latest valuation of $589 million.
The price includes the estimated upfront land and enhancement premiums of $33.2 million.
The three properties are a four-storey ramp-up logistics property at 2 Pioneer Sector 1; Tuas Connection, a light industrial property comprising 15 double-storey industrial units; and an eight-storey high-specifications industrial property at 9 Kallang Sector.
The acquisition will increase the value of CLAR’s Singapore portfolio to about $12.3 billion. Upon the completion of the acquisition around 1Q2026, CLAR’s Singapore portfolio will account for 68% of its total assets under management (AUM).
The target properties are fully occupied by 19 tenants with a long weighted average lease expiry (WALE) of about 5.5 years. These tenants are publicly listed companies and multinational corporations in industries such as electronics & semiconductors, transportation & logistics, precision engineering as well as pharmaceuticals & life sciences.
CLAR also expects rental growth opportunities with rental escalations in most of the leases ranging from 1% to 5% per annum. In-place rents are about 15% below market rents, says the REIT manager in its Oct 7 announcement.
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The proposed acquisition is expected to be accretive to CLAR’s distribution per unit (DPU). The expected first year net property yield is around 6.4% pre-transaction costs and 6.1% post-transaction costs.
Should the acquisitions be completed on Jan 1, 2024, CLAR’s DPU is expected to improve by around 0.124 cents or 0.8% for the FY2024 ended Dec 31, 2024 on a pro forma basis.
In line with the acquisitions, CLAR’s trustee has entered into conditional put and call option agreements with DBS Trustee Limited for 2 Pioneer Sector 1 and Tuas Connection. DBS Trustee is the trustee of Supreme REIT.
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CLAR’s trustee has also entered into a share sale agreement with Supreme REIT and Clay SG Holdings I Pte. Ltd to acquire 100% of the issued share capital of Waterbay Investment, the registered proprietor of the property located at 9 Kallang Sector.
“These accretive acquisitions build on our recent acquisitions of a Tier III colocation data centre and a premium business space property which were completed in August,” says William Tay, executive director and CEO of CLAR’s manager.
He adds that the properties’ “strong lease profile” is a “rare and attractive opportunity” in Singapore’s industrial property market and will “enhance the resilience of CLAR’s income stream.”
The acquisition is expected to be funded by internal resources and/or existing debt facilities.
“This divestment reflects our ongoing commitment to unlocking value through disciplined asset management and strategic exits," says Bart Price, CEO of Vita Partners, the joint venture between Warburg and Lendlease.
"The three high-quality assets — two industrial and one high-tech — were part of a broader portfolio we acquired alongside our capital partners. This successful transaction demonstrates our consistent focus on creating and realising value for our investors," he adds.
In his Oct 7 note, Dale Lai of DBS Group Research points out that CLAR has been one of the most active S-REITs this year, having announced a series of acquisitions and divestments as part of its ongoing portfolio optimisation strategy.
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The latest acquisition is seen to benefit from a relatively long WALE and full occupancy, underscoring the stability of their income profile, although the initial NPI yield of 6.1% appears somewhat "tight".
Lai points out that two of the three properties, 2 Pioneer Sector 1 and Tuas Connection, were previously owned by Soilbuild REIT and were only sold to Vita Partners late last year.
According to Lai, Tuas Connection has historically demonstrated strong tenant retention and resilience, while 2 Pioneer Sector 1 is a newly redeveloped logistics facility that should attract steady leasing demand.
The third asset, 9 Kallang Sector (also known as the Qualcomm Building), was similarly acquired by the same Lendlease–Warburg Pincus joint venture in late 2024.
"While the entry yield may appear compressed, we see scope for healthy positive rental reversions at both 2 Pioneer Sector 1 and 9 Kallang Sector, given that these are relatively new high specification assets," says Lai.
In Lai's view, as the acquisition is expected to be completed only in 1QFY2026, earnings contribution will only be reflected in FY2026.
Even so, overall earnings will remain relatively flat compared to its earlier forecasts, as the incremental income from this acquisition will largely offset the income void arising from the earlier divestment of five Singapore assets, says Lai, who is keeping his "buy" call with an unchanged target price of $3.20.
CLAR units changed hands at $2.87 as at 9.11 am, up 0.7%.
