• One acquisition and one divestment
• Marginal positive impact to DPU and FV
• Valuations not attractive

Acquisition of The Kendall Science Park property…

Ascendas REIT (A-REIT) announced on 30 Mar 2015 that it has acquired a property, the Kendall, from its sponsor Ascendas Group for a purchase consideration of S$112m (total acquisition cost is S$113.7m after transaction fees). We view this as a timely acquisition as AREIT would not be liable to pay any stamp duties on this property (concession lapsed on 31 Mar 2015). The Kendall is a 6-storey multi-tenanted building located within the Singapore Science Park II, has a remaining land lease tenure of 64 years, and is easily accessible via Pasir Panjang Road and the Haw Par Villa Circle Line Station. It is not subjected to the tightened anchor tenant policy by JTC; it has an NLA of 16,824 sqm and current occupancy is healthy at 93.2%. The initial NPI yield of this property works out to be 6.8% (based on total acquisition cost). This compares favourably against our original FY15 NPI yield forecast of 6.3% for A-REIT’s existing portfolio. The property would be financed by existing debt facilities.

…and divestment of 26 Senoko Way

As part of its capital recycling exercise, A-REIT announced last evening that it has accepted an offer from JTC Corporation for the return of its 26 Senoko Way property (NLA of 10,723 sqm and comprises a 2-storey building with a 4-storey extension block). JTC would pay A-REIT a consideration sum of S$24.8m, which represents a 60% premium over its original acquisition price of S$15.5m in 2007. The proposed divestment is expected to be completed by Apr 2015.

Maintain HOLD

We expect these two developments to have an overall slight positive impact to A-REIT’s unitholders, and raise our FY16 DPU forecast by 0.8%. Our DDM-derived fair value estimate inches up marginally from S$2.42 to S$2.43. At 1.3x FY16F P/B ratio, we do not find A-REIT’s valuations attractive. Maintain HOLD.

Source: OCBC Research - 1 Apr 2015