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Wed Nov 11 From 2020-13: 57
Ascendas Real Estate Investment Trust (Ascendas Reit) UNITS lost ground on Wednesday after its manager announced it was preparing a war chest to acquire data centers and office buildings overseas.
The counter fell 6.3 percent or S $ 0.20 to S $ 2.99 at 1:11 p.m., after some 27 million units changed hands. It regained slight momentum to trade at S $ 3.00, down S $ 0.19, or 6 percent, at 1.53pm. Ascendas Reit was the third most actively traded by value on the Singapore Stock Exchange at the time.
Reit’s manager had requested a suspension of operations Tuesday morning, ahead of the announcements, and lifted it on Wednesday morning.
On Tuesday, the manager launched a S $ 1.2 billion capital fundraiser to finance potential and proposed acquisitions in the United States, Europe and Australia.
He set the issue price of the preferential offer to unitholders at S $ 2.96 per new unit, the lower end of the indicative range.
That’s a 7.8 percent discount over the volume weighted average price (VWAP) of S $ 3.2096 for all transactions made on the units on November 9, up until the time the underwriting agreement was signed on November 10. .
The preferential offer will be made on the basis of 37 new units for every 1,000 existing units owned, the manager said Wednesday morning.
Meanwhile, the private placement was priced at S $ 3,026, also at the lower end of the indicative price range, representing a 5.7 percent discount to the VWAP.
Gross proceeds will amount to about S $ 800 million from the private placement and about S $ 396.5 million from the prime offering.
The total purchase price of the acquisitions in Europe, Australia and the United States is estimated at S $ 2 billion, the manager told analysts and the media during a webcast on Tuesday.
The proposed acquisition in the United States involves two freehold office properties in San Francisco with a combined price of US $ 560.2 million, which will be partially financed with approximately one-third of the proceeds from the fundraising.
That translates to a “decent” return on initial net property income (NPI) of 4.9 percent, before transaction costs, OCBC Investment Research said.
OCBC analysts noted that the properties are located in the South of Market (SoMa) submarket, the epicenter of San Francisco’s tech industry, which is expected to benefit from the likely increase in tech employment and has seen tight vacancy rates.
SoMa has a concentration of 85.6 percent of leases in the technology sector, said Maybank Kim Eng (MKE). “Strong demand growth and new limited supply through 2030 should support growth in occupations and rentals,” the brokerage added.
The two properties are under-rented by 5-25 percent, according to management, suggesting higher NPI returns of 6 percent can be achieved, up from 4.9 percent, said MKE analyst Chua Su Tye. .
One of the buildings is fully leased to payments giant Stripe with a weighted average lease maturity (WALE) of seven years, while the other is fully leased to image-sharing platform Pinterest with a WALE of 12.4 years. Triple network leases are integrated with rent increases of 2 to 3 percent per year.
“Given the long WALEs of the two properties with no release clauses, we believe this would mitigate any concerns about the impact and trend of working from home employees,” OCBC wrote.
CGS-CIMB said that after the US acquisition, Ascendas Reit’s (AUM) assets under management will likely expand to S $ 13.75 billion, of which roughly two-thirds are in Singapore, while the rest are in Singapore. found abroad.
In Europe, Ascendas Reit is considering a portfolio of large-scale data centers in Tier 1 hubs. These properties will have a combination of triple-network enclosures and turnkey operational data centers. The manager said he hopes to acquire this portfolio with “attractive real estate returns.”
If successful, the deal with Europe will increase the trust’s data center exposure, per AUM, from 4% to 10%.
About half of the proceeds from the fundraising exercise will partially finance the potential purchase in Europe, while another S $ 180 million will be used for the potential acquisition of a suburban office property in a Tier 1 city in Australia.
These two agreements are subject to the completion of negotiations with the sellers and satisfactory due diligence.
MKE said Tuesday that Reit’s fundamentals remain strong, supported by its scale, distribution per unit (DPU) visibility and increased diversification abroad. The brokerage maintained its “buy” recommendation and price target of S $ 4.00.
Reit’s manager said on Tuesday that if the US, European and Australian purchases are completed, the DPU backlog will be around 2 to 2.5 percent, assuming they were completed on April 1, 2019.
CGS-CIMB maintained its earnings estimates, “add” rating and price target of S $ 3.20 pending details on the European and Australian deals.
“We continue to like Ascendas Reit for its resilient and diversified portfolio and strong inorganic growth visibility,” wrote CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei.
OCBC also sees the benefits of the trust’s broad geographic footprint. The acquisitions will further diversify its revenue streams and build portfolio resilience, the research team added, retaining its fair value estimate of S $ 3.92 and “buying” the stock.
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