Awarded site at Fusionopolis

Award of the Fusionpolis site. A-REIT announced on 8 Jun that it has been awarded the Fusionopolis site by JTC for S$110m, which will be developed into a modern suburban business space facility. The public tender for the 6,253 sqm site at Fusionopolis Link by industrial landlord JTC Corp was launched on 28 Feb and closed on 20 May. The site, which lies within the 200-hectare one-north development housing research facilities and business parks, has a 60-year land lease and is on the confirmed list of the government’s industrial land sales programme for 1H11. It has a maximum plot ratio of four and can be developed up to 160 metres above sea level.

Development Plans. A-REIT will develop a suburban business facility of 25,000 sqm GFA comprising 60% business park space and 40% office space1 to cater to prospective tenants in the ICT and media industries as well as R&D activities in physical science and engineering. The expected completion date is 3Q2013. The strategic location of the site will also reinforce A-REIT’s presence and market share within the business & science parks segment while achieving economics of scale in operations. This 6,253-sqm site is located within walking distance to the one-north MRT station which is expected to be operational in 4Q2011 and easily accessible via the AYE. A-REIT believes that this development will provide unitholders with potentially greater returns compared to outright acquisitions of income-producing properties. It will also improve the NAV of its portfolio as A-REIT will receive any benefit of unrealised valuation gain from the development of the site.

Maintain BUY. We have factored in contributions from the new site into our valuation. Our assumptions place the total development costs, financed entirely by debt, at S$178.8m (S$665 psf ppr), with a modest initial NPI yield-on-cost of 7% and 6.5% for the business park and office segments respectively. This is slightly above A-REIT’s existing NPI yield of 6.46% in FY2010/2011. Nonetheless, we remain skeptical of the clear differentiation between the two segments, and presume A-REIT will probably market the business park segment with a more R&D slant. We expect rental income to be streaming in from Oct 2013 onwards. Our RNAV-derived fair value increased from S$2.04 to S$2.08. Maintain HOLD.

A-Reit awarded business park site at Fusionopolis

ASCENDAS Real Estate Investment Trust (A-Reit) was officially awarded a business park site at Fusionopolis by JTC Corporation yesterday.

The industrial Reit had put in the top bid of $110 million for the 60-year leasehold site at Fusionopolis – within the one-north research hub – at the close of the state tender on May 20. The 67,300-sq-ft site at Fusionopolis Link has a maximum gross floor area of 269,200 sq ft.

A-Reit is a unit of Ascendas Pte Ltd, which is in turn a wholly-owned subsidiary of JTC.

The acquisition therefore constitutes an ‘interested person transaction’. But the deal is exempted from the usual constraints as the site was awarded by way of a public tender, said A-Reit.

The trust said that the the strategic location of the site will reinforce A-Reit’s presence and market share within the business & science parks segment while achieving economies of scale in operations.

‘The manager believes that the development of the site will provide unitholders of A-Reit with potentially greater returns compared to outright acquisitions of income-producing properties and thus improve the net asset value of A-Reit’s portfolio as A-Reit will receive any benefit of unrealised valuation gain from the development of the site,’ A-Reit said in a filing to the Singapore Exchange.

‘This property is also in line with the future economic development direction of Singapore to attract further investment from value and knowledge intensive industries.’

A-Reit shares gained one cent to close at $2.01 yesterday.

A-REIT tops bid for site at Fusionopolis

Highest bid for Fusionpolis Link. A-REIT has submitted the highest bid of S$110m for a site at Fusionopolis to develop a business park. The public tender for the 6,253 sqm site at Fusionopolis Link by industrial landlord JTC Corp, which was launched on 28 Feb and closed on 20 May, attracted seven bids. The site, which lies within the 200-hectare one-north development housing research facilities and business parks, has a 60-year land lease and is on the confirmed list of the government’s industrial land sales programme for 1H11. It has a maximum plot ratio of four and can be developed up to 160 metres above sea level. The project completion period is slated for 24 months. A-REIT’s bid at S$110 million was 29% above the next-highest bid by Mapletree Trustee Pte Ltd and more than doubled the bids by Soilbuild Group and Cambridge Industrial Trust, respectively.

Development plan. If awarded the site, A-REIT will develop a suburban business facility of 25,000 sqm GFA comprising 60% business park space and 40% office space to cater to prospective tenants in the ICT and media industries as well as R&D activities in physical science and engineering. The strategic location of the site will also reinforce A-REIT’s presence and market share within the business & science parks segment while achieving economics of scale in operations.

Maintain HOLD. According to A-REIT, the total development cost of the property is not expected to exceed 3.3% of its deposited property (S$5.4b) as at 31 Mar. With land acquisition cost of S$110m, this works out to approximately S$68.8m of construction costs (or S$2,752 psm) in the worst case or total development cost of S$7,150 psm. On a GFA psm basis, AREIT’s recent acquisition of Neuros & Immunos (already developed), completed on 1 Apr, cost S$3,400 psm. This is at a 23% discount to A-REIT’s land parcel bid price of S$$4,398 psm for Fusionpolis Link. We also noted that another commercial site in the vicinity at North Buona Vista Drive, won by Ho Bee Developments on 5th Aug 2010, cost S$3,684 psm then. Based on these deals, A-REIT’s bid price may be on the high side. Nonetheless, A-REIT has additional debt headroom of S$434m before hitting the 40% gearing level as at 31 Mar. This gives it more than sufficient fund to develop this project. Pending the final award of the tender, we have not yet factored in contributions from the new site in our valuation. Maintain HOLD with an unchanged fair value S$2.04.

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.

A-Reit tops bid for site at Fusionopolis

Total of seven bids, ranging from Cambridge trust’s $50.38m to A-Reit’s $110m

A-Reit’s bid of $110 million, or $4,397.89 per square metre per plot ratio (psm ppr), was 29 per cent above the next-highest bid of $85.24 million, by Marina Trust trustee Mapletree Trustee Pte Ltd, and more than double the lowest bid of $50.38 million, by Cambridge Industrial Trust.

If awarded the site, A-Reit will develop it into a modern business facility with 25,000 square metres of gross floor area – comprising 60 per cent business park space and 40 per cent office space, it said yesterday.

The facility will cater to tenants in the infocomm technology and media industries as well as research and development activities in physical science and engineering, A-Reit said.

The site, which lies within the 200-hectare one-north development housing research facilities and business parks, has a 60-year land lease and is on the confirmed list of the government’s industrial land sales programme for the first half of this year.

It has a maximum plot ratio of four and can be developed up to 160 metres above sea level.

The site is also within walking distance of the one-north MRT station that is expected to open in the fourth quarter of this year.

The sale of the site for the third phase of the Fusionopolis development within one-north marks its latest expansion since the completion of the first phase in 2008.

The second phase is currently in development.

‘The strategic location of the site will reinforce A-Reit’s presence and market share within the business and science parks segment while achieving economics of scale in operations,’ A-Reit said in a statement.

Other bidders for the site included a joint venture of Ho Lee Properties and ZACD Investments, which submitted a bid of $83.1 million, and Far East Organization unit Tuas Hi-Tech Park Pte Ltd, which bid $64.78 million.

Two other Singapore developers – Ho Bee Investment and Soilbuild Group – also put in their own bids. Ho Bee bid $60.18 million, while Soilbuild offered $54.12 million.