Date: October 14, 2024
Broker: Lim & Tan Securities Pte Ltd

Divestment of 21 Jalan Buroh Property

On October 14, 2024, Capitaland Ascendas REIT (CLAR) announced that it has entered into a sale and purchase agreement for the sale of 21 Jalan Buroh in Singapore. The property will be sold to GDS IDC Services Pte. Ltd. for a sale consideration of S$112.8 million. This sale represents a significant premium over the original purchase price of S$58.4 million when CLAR acquired the property in June 2006, as well as a premium to the average of two independent market valuations at S$67.5 million as of July 1, 2024.

Financial Impact of the Divestment

The divestment is aligned with CLAR’s proactive asset management strategy to enhance portfolio quality and optimize returns for its unitholders. CLAR expects to generate net proceeds of approximately S$102.9 million after divestment costs, with potential uses including financing committed investments, reducing debt, providing loans to subsidiaries, funding working capital, or making distributions to unitholders.

If the divestment had been completed on January 1, 2023, CLAR’s pro forma net property income for FY2023 would have decreased by S$4.6 million, while the distribution per unit (DPU) would have been reduced by 0.085 Singapore cents. Additionally, CLAR’s aggregate leverage would have declined from 37.9% to 37.4%, assuming the net proceeds were used to repay borrowings.

Property Details

The 21 Jalan Buroh property is a three-storey ramp-up warehouse with a seven-storey ancillary office block. It has a total gross floor area of 39,978 square meters and a remaining land lease tenure of approximately 31 years. This property divestment is expected to be completed within the fourth quarter of 2024.

Portfolio and Market Position

Following the completion of the divestment, CLAR will own a total of 228 properties, which includes 96 properties in Singapore, 34 in Australia, 48 in the United States, and 50 in the United Kingdom/Europe. The current market capitalization of CLAR stands at S$12.28 billion. The REIT is trading at 20x forward price-to-earnings (PE) and 1.2x price-to-book (PB), with a dividend yield of 5.4%.

Analyst’s Rating and Target Price

Lim & Tan Securities maintains an “Accumulate” rating on CLAR, citing its strong and diversified portfolio. The consensus target price for CLAR is S$3.15, which implies a 13% upside from its current share price of S$2.79. The broker highlights CLAR’s focus on pivoting towards faster-growing data centers, a move expected to drive future growth, especially in a favorable interest rate environment. The recent property disposal has unlocked capital, providing more flexibility for investment in data center assets.