Overview of CapitaLand Ascendas REIT (CLAR)

CapitaLand Ascendas REIT (CLAR) operates a diversified real estate portfolio valued at S\$16.8 billion as of December 2024. Its portfolio spans 229 properties across Singapore, Australia, Europe, the United Kingdom, and the United States. The REIT focuses on various asset classes, including business and science parks, life sciences, suburban office spaces, high-specification industrial facilities, data centers, light industrial properties, and logistics and distribution hubs.

Key Financial Highlights

CLAR delivered a strong performance for the second half of 2024, driven by cost-efficiency measures and strategic redevelopment projects. Here are the financial highlights:

• Gross Revenue: S\$753 million (-1.1% YoY) due to divestments and decommissioning of properties for redevelopment.
• Net Property Income (NPI): S\$521.5 million (+1.4% YoY), supported by a 1.8 percentage point improvement in NPI margin to 69.3%.
• Distributable Income: S\$338 million (+3.4% YoY), aided by a 1.9% reduction in finance costs.
• Distribution Per Unit (DPU): 7.681 Singapore cents (+3.2% YoY).

Occupancy and Rental Reversions

CLAR’s portfolio occupancy rose 0.7 percentage points quarter-on-quarter (QoQ) to 92.8% in Q4 2024, supported by improvements across Singapore, Australia, and the United States. Specific highlights include:

• Singapore: Occupancy at 92.5%, with ONE@Changi City achieving 99.5% occupancy (+18ppt QoQ).
• Australia: Occupancy at 92.5% (+0.8ppt QoQ).
• United States: Occupancy at 88.9% (+1.8ppt QoQ), with Kansas City logistics properties Lackman Business Centre 1-3 and 4 restored to full occupancy.
• UK/Europe: Occupancy remained stable at 99.3%.

The REIT achieved an average rental reversion of 8.6% in Q4 2024, driven by positive outcomes across regions:

• Singapore: +7.2%, led by logistics properties (+17.8%).
• Australia: +6.6%.
• UK/Europe: +10.9%.
• United States: +11.6%.

Geographic and Asset Class Breakdown

CLAR’s portfolio is well-diversified across geographies and asset classes:

• Geographic Distribution: Singapore (65.9%), Australia (13.2%), United Kingdom/Europe (9.6%), United States (11.4%).
• Asset Class Distribution: Business Space (38%), Logistics (25%), Industrial (20%), Data Centre (9%), Life Sciences (8%).

Redevelopment and Acquisition Initiatives

CLAR is aggressively pursuing redevelopment projects to enhance its portfolio value and align with market trends. Key initiatives include:

Redevelopments in Singapore

CLAR is redeveloping several properties, including:

• 1 Science Park Drive (34% stake).
• 27 International Business Park (IBP).
• 5 Toh Guan Road East.
• Logis Hub @ Clementi.

These projects, worth S\$775 million, are scheduled for completion between Q1 2025 and Q1 2028. Additionally, the lease for Telepark in Tampines Hub, currently a data center, expires in 2025. Management is exploring its redevelopment into a commercial property.

Data Center Redevelopment in the UK

CLAR has received planning approval to expand its data center at Welwyn Garden City to 60MW. Redevelopment is expected to commence in 2025.

Acquisition in the United States

CLAR completed the acquisition of DHL Indianapolis Logistics Centre for S\$150 million (US\$116 million) in January 2025. The property, leased back to DHL USA for 11 years with a 3.5% annual rental escalation, serves as a regional distribution hub for Indianapolis and the Midwest markets.

Financial Outlook and Risks

Despite rising interest rates, CLAR remains resilient due to its cost management strategies and redevelopment contributions. The REIT projects a stable aggregate leverage of 37.7% as of December 2024, with 83% of borrowings on fixed or hedged interest rates. Weighted debt maturity stands at a healthy 3.5 years.

For 2025, management expects a positive mid-single-digit rental reversion. However, they have trimmed the DPU forecast by 4% for 2025 and 1% for 2026 due to the sustained high-interest rate environment.

Valuation and Recommendation

UOB Kay Hian maintains a BUY rating for CapitaLand Ascendas REIT, with a target price of S\$3.51. The valuation is based on the Dividend Discount Model (DDM), assuming a cost of equity of 7.0% and a terminal growth rate of 2.5%.

CLAR offers a distribution yield of 5.8% for 2025, making it a compelling choice for investors looking for steady returns and growth potential in the real estate sector.