ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)
Ascendas REIT - Positioning For Growth
Ascendas REIT raising S$1.2b, adding in the US
- Ascendas REIT (SGX:A17U) is raising c.S$1.2b in new equity, a-third of which will be used to fund its latest US acquisition; a foothold into San Francisco’s thriving tech market, and the rest, to support potential entry into European data centres and to deepen its Australian suburban office AUM.
- Management is eyeing +2.0-2.5% DPU accretion for the three deals, and we maintain our forecasts pending completion and details on the equity fund raising. Fundamentals are strong, backed by its scale, rising DPU visibility, and further overseas diversification, while valuations remain compelling at 5.2% FY21 yield.
- Maintain BUY on Ascendas REIT, with DDM-based S$4.00 Target Price (COE: 6.0%, LTG: 2.0%).
Gaining foothold in San Francisco with new deal
- Ascendas REIT will acquire two freehold Class A office properties in San Francisco - 510 Townsend and 505 Brannon for USD560.2m (S$768.0m). See Ascendas REIT's nnouncements. Both assets, completed in 2017, are fully-leased to Pinterest and Stripe, at a 9.1-year WALE, on triple-net leases embedded with +2-3% pa rental escalations. They are well-placed in the SoMA submarket, which boasts the highest 85.6% concentration of tech sector tenancies.
- Strong demand growth and capped new supply till 2030, should underpin growth in occupancies and rents. They are under-rented by 5-25%, according to management, which suggests higher NPI yields of 6.0% (from 4.9%) are achievable.
New ‘growth’ tenancies to strengthen AUM
- Post-deal, Ascendas REIT's overseas properties are expected to rise from 30% to 34% of AUM, with the higher US contribution (from 10% to 15%).
- Stripe, a leading USD36b merchant payment provider, and Pinterest, a USD35b visual discovery engine, will place within Ascendas REIT's top ten tenancies at 2.3% and 1.4% of gross revenue, and lift its US portfolio concentration to higher-growth technology, biomedical and digital media segments from 65% to 75%, while extending its portfolio WALE to 4.1 years (from 3.9 years).
Readying war-chest for data centre expansion
- An equity fund raising was launched to raise S$1.2b to fund the acquisition, together with
- a portfolio of European data centres located within tier-1 data centre hubs involving a mix of triple net powered shells and turnkey data centres (S$614.0m), and
- its sixth suburban office asset (S$180.0m).
- All in, management expects Ascendas REIT's leverage to stay at 37-38%.
- See Ascendas REIT Share Price; Ascendas REIT Target Price; Ascendas REIT Analyst Reports; Ascendas REIT Dividend History; Ascendas REIT Announcements; Ascendas REIT Latest News.
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2020-11-10
SGX Stock
Analyst Report
4.000
SAME
4.000
