UOB Kay Hian Private Limited
June 18, 2025

CapitaLand Ascendas REIT: Accelerating Growth with Strategic Data Centre and Business Park Acquisitions

Overview: CapitaLand Ascendas REIT Expands Singapore Footprint

CapitaLand Ascendas REIT (CLAR), a leading diversified real estate investment trust, is making significant strides to reinforce its dominance in Singapore’s resilient property market. With a robust portfolio valued at S\$16.8 billion as of December 2024, spanning 229 properties across Singapore, Australia, Europe, the UK, and the US, CLAR is strategically capitalizing on high-growth sectors such as data centres, life sciences, logistics, and high-specification industrial spaces.

Key Highlights and Financial Summary

• Share Price: S\$2.64
• Target Price: S\$3.58 (Upside: +35.6%)
• Market Capitalization: S\$12.15 billion (US\$9.48 billion)
• Major Shareholder: Temasek Holdings (19.6%)
• 2025 Forecast NAV/Share: S\$2.27
• 2025 Net Debt/Share: S\$1.51
• 2025F Distribution Yield: 5.8%
• 52-week High/Low: S\$2.99/S\$2.40

Strategic Acquisitions Bolster Core Portfolio

CLAR has announced the proposed acquisition of two prime assets in Singapore for a combined S\$700 million:

• 9 Tai Seng Drive (9TSD): A Tier III colocation data centre, fully leased to established tenants in the digital, social media, e-commerce, and financial services sectors. The asset features robust technical specifications, including 99.982% annual uptime and a power usage effectiveness of 1.4. The agreed property value is S\$455 million, which represents a 2.2% discount to independent valuation. 9TSD is 100% occupied, with a WALE of 4.4 years and offers annual rental escalations of 2-3.5%. Notably, its current rental rates are 30% below market average, indicating substantial upside potential. The first-year NPI yield stands at an attractive 7.1% post-transaction costs.
• 5 Science Park Drive (5SPD): A premium business space within the Geneo life science and innovation cluster, directly connected to Kent Ridge MRT station. This property is fully leased to Shopee (Sea Limited) with a remaining land lease of 56 years, and the agreed value of S\$245 million (7% discount to independent valuation). The first-year NPI yield is 5.7% after transaction costs, or 5.0% if the S\$30 million deferred consideration is included. The property delivers secure income with potential for a 15% rental reversion when Shopee renews its lease in late 2026.

Data Centre and Business Park Expansion: Key Impact and Portfolio Metrics

• Singapore AUM Impact: These acquisitions expand CLAR’s Singapore AUM by 6.6% to S\$11.7 billion, with Singapore now comprising 67% of total portfolio value (up from 65%).
• Data Centre Growth: Data centre AUM surges by 32.8% to S\$1.9 billion, now accounting for 10.8% of the portfolio (previously 8.3%). Singapore data centres make up 54% of this segment, with the remainder in the UK/Europe.
• DPU Accretion: Pro forma 2024 DPU is forecast to rise by 0.206 S cents (1.4%), excluding deferred consideration. Including a projected 15% rental reversion and payment of deferred consideration, DPU accretion could reach 1.6%. NAV per unit is expected to increase by 3.5% to S\$2.35, while aggregate leverage is projected to decrease by 0.5 percentage points to 38.4%.

Standalone Asset Analysis

• 9TSD: Expected to improve pro forma 2024 DPU by 1.24%. This data centre, with 30% rental upside and tight vacancy rates in the Singapore market (2%), presents significant reversionary potential as leases are renewed and power capacity is increased.
• 5SPD: Adds 0.14% to 2024 pro forma DPU (excluding deferred consideration), or up to 0.25% assuming a 15% rental reversion post-2026 renewal.

Funding Structure and Balance Sheet Strength

• Funding Mix: The acquisitions are funded via a 70:30 equity-to-debt mix. A private placement of 202.4 million new units at S\$2.47 each raised S\$500 million, completed in June 2025. An additional S\$200 million was secured through a bank loan at a 3.0% cost of debt.
• Leverage: Aggregate leverage expected to remain healthy, dipping slightly post-acquisition.

Development and Redevelopment Pipeline

CLAR is actively developing and redeveloping properties worth S\$775 million, targeted for completion between Q1 2025 and Q1 2028. Key projects include:

• Summerville Logistics Center (South Carolina, US): New logistics property offering 548,862 sqft NLA, scheduled for Q4 2025 completion.
• Geneo at 1 Science Park Drive (34% Stake): Life science campus with three Grade A buildings and event plaza; 71% of space is biomedical R&D-ready, 76% pre-committed, 19% in advanced talks. Completed March 2025.
• 27 International Business Park (IBP): Redevelopment to double GFA to 265,233 sqft, with enhanced amenities. Completion slated for Q1 2026, benefiting from improved transport links by 2028.
• 5 Toh Guan Road East: Conversion to a modern six-storey ramp-up warehouse for logistics and last-mile delivery; ready by Q4 2025.
• LogisHub @ Clementi: Seven-storey ramp-up logistics facility with 122% GFA increase to 633,133 sqft, featuring cold storage and large floor plates; completion by Q1 2028.

These projects are expected to drive a robust 7% DPU growth in 2026.

Earnings Forecast and Financial Projections

DPU forecasts have been raised by 0.9% for 2025 (reflecting half-year contributions from new acquisitions) and 1.7% for 2026 (full-year impact).

Asset Overviews

9 Tai Seng Drive (9TSD)

• Agreed Property Value: S\$455.2 million (2.2% discount to independent valuations)
• Tenure: 30 years remaining (expiring 31 May 2055)
• Initial NPI Yield: 7.2% (7.1% post-transaction)
• GFA: 20,307 sqm
• NLA: 6,968 sqm
• Committed Occupancy: 100%
• WALE: 4.4 years
• Key Tenants: Leading digital, e-commerce, and financial services companies

5 Science Park Drive (5SPD)

• Agreed Property Value: S\$245 million (includes S\$30 million deferred, 7% discount to independent valuations)
• Tenure: 56 years remaining
• Initial NPI Yield: 6.1% (5.7% post-transaction, or 5.0% including deferred consideration)
• GFA: 25,534 sqm
• NLA: 22,488 sqm
• Committed Occupancy: 100%
• WALE: 1.5 years
• Key Tenant: Shopee

Key Operating Metrics

Valuation and Investment Recommendation

• Valuation Basis: Target price of S\$3.58, based on DDM (Cost of Equity: 7.0%, Terminal Growth: 2.5%).
• Investment Thesis: Maintain BUY. CLAR offers resilient growth anchored by its diversified exposure across business parks, hi-tech buildings, life sciences, logistics, and data centres. The trust benefits from contributions from ongoing development projects, AEIs, and robust demand in supply-constrained submarkets.

Share Price Catalysts

• Resilient and diversified income streams across key real estate segments
• Contributions from development and redevelopment projects
• Active asset enhancement initiatives (AEIs)
• Potential rental uplift from under-rented data centre assets and expiring leases

Conclusion

CapitaLand Ascendas REIT continues to deliver on its promise of sustainable growth and attractive distributions. With strategic acquisitions in the data centre and life sciences sectors, a strong development pipeline, and prudent financial management, CLAR is well-positioned to generate value for investors and capitalize on secular trends in the real estate market. The REIT remains a top pick for investors seeking defensive exposure with upside in Asia’s dynamic property landscape.