A-REIT – DMG

Tender for Business Park Site at Fusionopolis

S$110m bid for Fusionopolis under Government Land Sales programme. Ascendas REIT (A-REIT) has submitted bid for a 6,253sqm site at Fusionopolis within the one-north master plan region. Should A-REIT successfully win the bid, it will develop the site into a modern suburban business facility of 25ksqm GFA, comprising 60% business park space and 40% office space to cater to prospective tenants from IT and Media industries, as well as R&D activities in Physical Science and Engineering. We view A-REIT’s tender positively as this will strengthen A-REIT’s leadership position in the Business & Science Parks segment. We will only factor in contributions from this site when 1) more details are revealed, and 2) A-REIT successfully wins the tender. Maintain NEUTRAL with unchanged TP of S$2.00.

Close proximity with other A-REIT’s properties. The location of the site is ideal for tenants given its close proximity to 1) One North MRT station which will be operational in 4Q11, and 2) easy accessibility via the Ayer Rajah Expressway. In addition, its close proximity to A-REIT’s existing properties within the one-north region and Science Parks I & II will bring about economies of scale in operations. Based on proposed GFA, the current site at Fusionopolis is valued more dearly at ~S$4.4kpsf vs S$3.4kpsf for Neuros & Immunos acquisition announced in Mar 2011. Including this latest bid, A-REIT will be undertaking five development projects in the next two years.

More deals in the pipeline. We believe there are more deals in the pipeline for A-REIT which mentioned that it is currently in discussion on a potential acquisition worth S$200m. The outcome of the potential acquisition should be known in the next 3-6 months. In addition, based on its total asset as of end Mar 2011, we estimate A-REIT has a debt headroom of ~S$540m assuming maximum gearing of 45%. Armed with a healthy balance sheet, we believe AREIT will have the advantage of being able to respond quickly towards acquisition and development project opportunities.