, Singapore

Ascendas REIT sells 10 Woodlands Link property for $19.3m

They are selling it to Sengkang at a premium.

According to RHB, Ascendas REIT (A-REIT) announced the divestment of its 10 Woodlands Link (formerly NNB Building) property to Sengkang Import & Export Pte Ltd for $19.3m. The buyer is a licensed importer of rice and various food products. The property is located in Woodlands East Industrial Estate, and is a light industrial building comprising a three-storey warehouse.

The property has been vacant since Dec 2016 after the expiry of its single tenant’s lease. The building will be sold on as-is basis. 10WL has a remaining land lease tenure of about 38.7 years. The transaction has been approved by JTC Corp and is expected to be completed by 3Q17.

The divestment is positive and in line with A-REIT’s strategy of recycling capital. The sale price is 17% and 61% above its latest book value and original purchase price (2005) respectively, which we deem as highly attractive given the current market conditions.

Here’s more from RHB:

The pro-forma impact (assuming the divestment had completed on 1 Apr 2016) on A-REIT’s FY17 NPI and DPU is very small, at $0.87m (<0.2%) and 0.01 cents respectively. Gearing would be marginally lowered to 33.7% from 33.8%, assuming proceeds are used fully for debt repayments.

We like A-REIT’s efficient capital recycling strategy of divesting non-core assets and acquiring assets with long weighted average lease expiry (WALE) and lease tenures. In FY17, A-REIT divested $441.6m worth of properties and acquired $565.6m of assets in Singapore and Australia.

Maintain our BUY recommendation with unchanged TP of $2.73. Our DDM-derived TP is based on a
CoE of 7.5% and terminal growth of 1.5%. The stock currently offers FY18F-19F yields of 6.1%/6.2% respectively.

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