In November 2002, Ascendas Real Estate Investment Trust was listed on the Singapore Exchange at a market cap of S$636 million — focused on business space and industrial assets.
In 2015, its sponsor Ascendas Pte Ltd merged with Singbridge Pte Ltd to form Ascendas-Singbridge.
Then, in 2019, Capitaland acquired Ascendas-Singbridge at an enterprise value of ~S$10bn, half in cash and stock, respectively.
By purchasing Ascendas-Singbridge, Capitaland effectively became the sponsor of A-REIT, with some ~18% ownership. This essentially meant that Capitaland became responsible for providing a pipeline of real estate assets for A-REIT to manage.
For branding purposes, A-REIT ended up renaming itself to Capitaland Ascendas REIT (CLAR) in 2022.
Today, CLAR trades at ~S$2.60 with a market capitalization of S$12 billion.
I know, this is one of the most confusing mergers out there. Here’s what you need to know about CLAR at 5% dividend yield.
Let’s dive in.
CLAR’s S$500 million private placement
Earlier this year, there was some activity with CLAR. But before we go into it, let’s take a look at its portfolio. CLAR is a multi-asset portfolio focusing on 3 key segments:
- Business Space & Life Sciences
- Logistics
- Industrial & Data Centres
It’s also diversified across Singapore, Australia, the US, and Europe.
So what’s going on? Recently, CLAR raised S$500 million via a private placement. Basically, it’s giving out more units to private investors priced at S$2.47 per unit. That’s a discount from the ~S$2.58 it’s been trading at lately, so why raise more capital
Management is expanding CLAR’s Singapore portfolio into the technology sector. Of the S$500 million raised…
- S$275 million will be used to acquire a data centre (9 Tai Seng Drive)
- S$137 million will be used for acquiring a business space (5 Science Park Drive)
- Rest used to pay down debt
Below are the details behind the properties.
Just by looking at the acquisition alone, there are a few things that stood out.
First, acquisition costs are under the average valuations made by JLL & Savills. This means CLAR bought at a good price under fair value.
For both properties, the occupancy rates are fully occupied. On top of that, the key tenants are Shopee and well established users from great industries.
Lastly, both net property income (NPI) yields are 6-7%. NPI yield measures the net property income generated against its market value or acquisition cost. Essentially, a 7.2% NPI yield generates S$7.20 for every S$100 in property value.
In fact, both properties are expected to increase DPU’s by S$0.206, or 1.36%.
Honestly, these acquisitions make sense. CLAR’s country exposure to Singapore will rise from 65% to 67%. Its Data Centre portfolio will go up by over 35% to ~S$1.9 billion.
Meanwhile, its Business Space & Life Sciences portfolio by ~3.6% to ~S$5.7 billion.
The moment these properties become acquired, they will immediately contribute to CLAR’s distributions.
Furthermore, these properties are more complex than your traditional retail or commercial real estate. They’re harder to set up and maintain.
So once tenants move into these properties, it becomes expensive for them to switch to another location. This reduces turnover.
In fact, CBRE states that vacancy rates for data centres in Singapore are less than 1%. Thus, there is potential for CLAR to raise rental rates for its new 9 Tai Seng Drive asset, given its current rents are ~30% below market rate.
This is the same for its new 5 Sciences Park Drive asset. Its strategic location at Science Park has over 350 multinational corporations and is near to National University of Singapore (NUS). This would potentially raise rental rates by ~15% in the future.
CLAR’s latest financial results — what you need to know
Other than CLAR’s latest M&A activity, its latest quarter was pretty smooth sailing. The major Singapore REIT recently completed an acquisition of DHL Indianapolis Logistic Centres in January 2025, redeveloped 1, 1A, and 1B Science Park Drive, and completed two Asset Enhancement Initiatives (AEI) projects.
However, one problem stood out: Its occupancy rates fell all across the board.
The silver lining here is its Australian portfolio, which experienced the greatest drop in occupancy rates, is expected to rise in the near future as there has already been commitment secured for parts of the vacant space.
One thing I like from CLAR’s projections is its supply of data centres.
Take a look at the graph below…
There’s not much new supply for Singapore’s industrial properties and data centres up to 2028. That’s the good news.
What’s more is that out of these seven properties, four of them are expected to be committed. In reality, there’s only three properties that are available – Bulim Square, JTC@Ang Mo Kio and Stellar@Tampines – of which one is already 45% committed.
Now, it’s no doubt generative AI is going to drive demand growth. McKinsey expects global demand for data centres to grow between 19-22% per year over the next five years, of which 70% will be AI related.
We could see CLAR’s data centres driving DPU growth.
The bad news with data centres is access to power supply. It’s no surprise computers eat up way more energy than a lightbulb. By the way, data centres often run 24/7 and need cooling systems to prevent overheating.
On the other hand, an office space doesn’t use up much energy at night.
Are CLAR’s dividends sustainable?
Over the last five years, CLAR has paid stable distribution between 5-6% yield.
Credit: Singapore REITs’ financial statements
Yet, CLAR’s share price has dropped by ~17%, which isn’t great. But when we look at other comparable REITs, it’s actually not doing too bad.
At current prices, CLAR trades at a P/B ratio of 1.1x. That’s higher than other Singapore REITs. This means investors could be paying more than what the assets are worth.
Of course, investors are willing to pay a higher price because they expect higher growth from a company. This is reasonable for CLAR, because we can expect the value of data centres to grow faster than a retail property.
My final thoughts
Looking at the analyst coverage from most of the major big banks, analysts currently has a “buy” rating on CLAR.
At 5% dividend yield, CLAR’s distributions are driven by its stable property portfolio. One potential is its exposure to data centres.
As management continues to grow this segment, it could be a tailwind for growing dividends.
While it’s not a slam dunk, there’s a reason the market is willing to pay a higher P/B ratio compared to other Singapore REITs.
Dear Willie,
1) I’ve been a loyal investor of Areit, I mean CLAR, since 2015.
2) My investment objective, steady passive income without me having to sweat too much for it.
3) Although CLAR does not deliver adrenaline inducing returns, it has slightly exceeded my expectations over the past decade.
p.s. I classify CLAR as an unglamorous tortoise, slow & steady to the finishing line…
Hey minx,
Wow, that’s impressive to have held that stock long enough and ride through the pandemic too.
What are your thoughts of MINT vs CLAR?
Cheers,
Willie