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CapitaLand Ascendas REIT to acquire Seagate's The Shugart in one-north for $218.2 mil

Felicia Tan
·4-min read

The acquisition is said to be accretive to CLAR’s distribution per unit (DPU) and net property income (NPI) yield.

CapitaLand Ascendas REIT (CLAR) A17U will be acquiring Seagate Singapore’s integrated high-specification research and development (R&D) facility, The Shugart, for $218.24 million. Including acquisition fees and other related fees, CLAR is expected to fork out a total of $232.4 million.

The acquisition of the property, which is located at 26 Ayer Rajah Crescent in one-north, will deepen CLAR’s footprint in the area.

CLAR currently has five assets in various clusters within one-north with a total asset under management (AUM) of $1.7 billion and net lettable area (NLA) of 2.0 million sq ft. The five assets, Nexus @one-north, Galaxis, Grab Headquarters, Neuros & Immunos and Nucleos, cater to the infocomm technology, media, science and engineering, biomedical and life sciences and emerging industries.

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Upon the completion of The Shugart, CLAR’s footprint in one-north will increase by 13% to an AUM of $1.9 billion over 2.5 million sq ft of NLA.

On a pro forma basis, the proportion of business space and life sciences properties in CLAR’s portfolio will increase to 49% – or $8.1 billion – of CLAR’s total investment properties that are valued at $16.7 billion.

Upon the completion of the acquisition, Seagate Singapore will enter into a 10-year leaseback of the property’s entire gross floor area (GFA) with the option to renew for an additional 10 years.

The lease term of 10 years comes with built-in rent escalation of 2.5% per annum (p.a.). The property is fully occupied with a weighted average lease to expiry (WALE) of 10 years.

The acquisition is said to be accretive to CLAR’s distribution per unit (DPU) and net property income (NPI) yield. The first-year NPI yield is approximately 8.3% and 7.8% pre-transaction costs and post-transaction costs, respectively.

On a pro forma basis, DPU for the FY2022 ended Dec 31, 2022, is expected to be an improvement of approximately 0.110 cents or a DPU accretion of 0.70%.

According to CLAR, the proposed acquisition is in line with its strategy to invest in properties that cater to the evolving market requirements from structural trends and consumption patterns such as digitalisation and e-commerce.

The Shugart, which was built around eight years ago, comprises a six-storey podium and a nine-storey tower with a cleanroom and data centre space for Seagate Singapore’s operations. Serving as Seagate’s primary R&D location outside the US, it also comes with other features including a sky garden, multi-purpose sports hall and gymnasium for its employees.

The acquisition is expected to be completed in the second quarter of 2023. Upon its completion, CLAR will own 231 investment properties comprising 98 properties in Singapore, 36 properties in Australia, 48 properties in the United States, and 49 properties in the UK and Europe.

Equity fund raising to raise $450.0 million

On the same day, CLAR announced that it is seeking to raise gross proceeds of $450.0 million through the proposed private placement of new units within the REIT. The number of new units were unspecified.

The units will be placed among institutional and other investors at an issue price that ranges from $2.713 to $2.769 per unit.

The issue price range represents a discount of 3.6% and 5.6% to the volume weighted average price of $2.8727 per unit for CLAR’s units on May 15.

The gross proceeds will partially fund the proposed acquisition of The Shugart, the potential acquisition of an asset in a “key gateway city” in Europe, as well as the proposed redevelopment of a logistics property in Singapore. Of the amount, $108.5 million will be used to repay the REIT’s debt.

The proposed acquisition of the asset in Europe is also said to be DPU accretive on a pro forma basis.

For illustrative purposes only, the estimated pro forma DPU accretion of The Shugart and the proposed acquisition of the asset in Europe is between 1.2% to 1.3%, if the acquisitions were completed on Jan 1, 2022.

Should the proposed acquisitions not go through, the proceeds of the private placement will be used to repay the REIT’s existing debt, as well as for funding future acquisitions and capital expenditures (capex).

DBS Bank and JP Morgan Securities Asia are joint global co-ordinators while DBS, JP Morgan Securities and Oversea-Chinese Banking Corporation Limited (OCBC) are the joint bookrunners and underwriters for the private placement.

Each of the joint bookrunners and underwriters have agreed to procure subscriptions for or place out for the new units under the private placement.

Units in CLAR closed at $2.88 on May 15.

Units in CLAR closed at $2.88 on May 15.

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