Joint Redevelopment of 1 Science Park Drive

• Ascendas REIT announced plans to jointly redevelop its 38-year old, 1 Science Park Drive (1 SPD) property with sponsor group CapitaLand Development (CLD), into a new 116,800 sqm life science and innovation campus by 2025. In addition to a projected 6.3% stabilised NPI yield, a first right to acquire the remaining 66% interest, is set to entrench its dominance as Singapore’s leading business and science park REIT landlord, as well as the best S-REIT growth proxy.

Gaining GFA From 3x Plot Ratio Uplift

• Ascendas REIT (SGX:A17U) will divest 1 SPD to the JV for S$103m (or 4.9%/14.9% premium to 1 Oct 2021/end-Dec 2020 valuations) and hold 34%, with CapitaLand Development owning 66%. The subsequent redevelopment, at a ~S$883m total development cost, will be supported by an increase in the site’s current maximum allowable 1.2x gross plot ratio to 3.6x, and a GFA boost from 31,888 sqm to 116,200 sqm.
• The new life science and innovation campus will comprise three interconnected Grade A buildings, and an event plaza with retail, F&B and supporting amenities. It aims to complete by 2025, with 80,000 sqm or 71% of business park space designed to house biomedical R&D activities.

Asset Well-placed to Capture New Economy Demand

• The property boasts strong CapitaLand Development till 2024, and should strengthen the asset’s appeal, and upside to management’s current S$5-6 psf rental assumptions.

Strong Balance Sheet, Acquisition Upside

• Ascendas REIT will deploy the net proceeds price (COE: 6.2%, LTG: 2.0%) for Ascendas REIT are unchanged for now.
• Ascendas REIT's valuations are undemanding at 5+% FY21 yield and ~4% DPU CAGR for this large-cap liquid name. BUY.

Source: Maybank Kim Eng Research - 16 Nov 2021