Ascendas REIT - Proposed acquisition of Science Park Drive Property
- Ascendas REIT (A-REIT) has proposed to acquire the leasehold interest in the property located at 12, 14 and 16 Science Park Drive from its sponsor.
- The property comprises three built-to-suit Science Park buildings held under a single land title. Two of the buildings are leased to DSO National Laboratories, Singapore’s national defence research & development organisation, while the third building is leased to DNV GL Singapore Pte Ltd, a Norwegian risk management company, for its South East Asia regional headquarters.
- The purchase consideration of S$420m comes in below the two independent valuations of S$428.8m and S$430.0m.
- Including acquisition fees, stamp duties and other professional fees, the total acquisition cost is estimated to be S$437.5m. Of this, the acquisition fee (S$4.2m) would be funded by the issue of units, S$100m would be satisfied by the issue of consideration units to the vendor and the balance would likely be debt funded.
- We are positive on this transaction as the acquisition would boost A-REIT’s portfolio WALE to 4.4 years from 3.7 years and the leases also have weighted built-in rental escalations of 2.2% to 2.5% per annum.
- The property is expected to generate a NPI yield of approximately 6.3% (before acquisition costs) and 6.0% (post-acquisition costs) in the first year of ownership.
- Maintain BUY and S$2.67 fair value estimate on A-REIT.