While the NPI yield makes sense given CLAR’s current cost of debt of 3.3%, the REIT has to refinance $660 million of debt this year. Despite having fixed rate debt at 77% of total debt, a 100 bps increase in interest rate on refinancing $660 million which matures this year is expected to have a pro forma impact of $6.6 million decline in distribution or 0.16 cents decline in DPU. In FY2022, CLAR’s DPU was 15.8 cents.
In a business update, CapitaLand Ascendas REIT’s (CLAR) manager said the REIT had completed acquisitions of two properties in Singapore for $296.7 million. They are 622 Toa Payoh Lorong 1, a six-storey high-tech property for $104.8 million; and 1 Buroh Lane, a Grade-A five-storey ramp-up cold storage logistics distribution centre for $191.9 million.
The Toa Payoh property has 21 years of land lease left; the net property income yield post-transaction costs works out at 6.8%. The property has a WALE of 4.5 years. If CLAR manages to keep the occupancy at 100%, the REIT would be able to recoup its initial investment of $191.9 million. 1 Buroh Lane’s NPI yield is 6.9% and the land lease is also for 21 years. its WALE is 7 years. So CLAR could recoup its investment in this property too if it keeps it fully occupied.
