Analysts were not excited when CapitaLand Development (CLD) and CapitaLand Ascendas REIT (CLAR) announced, on Nov 15, 2021, that they had formed a joint venture (CLD 66%, CLAR 34%) to invest $883 million to redevelop 1 Science Park Drive into a life science and innovation campus. Completion is scheduled for 2025.
The redevelopment itself sounds exciting enough. The upcoming life science and innovation campus on the site will have a total gross floor area (GFA) of 116,200 sq m (1.25 million sq ft), comprising three interconnected Grade-A buildings – one 15-storey-tall and the other two 9-storey-tall – and an event plaza with retail, F&B and supporting amenities. It will provide 112,500 sq m of business park space and 3,700 sq m for retail and F&B uses. The gross plot ratio of 3.6 represents a three-fold intensification of the current maximum allowable GPR of 1.2.
About 80,000 sq m, or 71% of the 112,500 sq m, of business park space has been designed to accommodate biomedical research and development activities. Under the multi-stage precinct rejuvenation for Singapore Science Park phase 1, eight older buildings in the park have been redeveloped. The former Mendel, Maxwell, Pascal and Pasteur buildings are now 12, 14 and 16 Science Park Drive, owned by CLAR. The Ascent building at 2 Science Park Drive and the building at 5 Science Park Drive are owned by CLD. In addition, CLD is currently redeveloping the building at 3 Science Park Drive into an integrated development with about 38,818 sq m of total GFA, comprising 28,818 sq m of business park space and 10,000 sq m of serviced residence with a hotel licence targeted for completion in 2024.
In a presentation on Nov 15, 2021, CLAR projected a pre-transaction cost stabilised NPI yield of 6.4% and a post-transaction stabilised NPI yield of 6.3%, translating into a 0.5% accretion to DPU. JP Morgan says this is likely to be based on $5 psf to $6 psf per month.
“The accretion is lower than our earlier estimates of 2% to 3% due mainly to CLAR’s smaller stake, higher assumed funding costs, with lower NPI margins of 70% compared to an earlier 72% estimate; and our $6.50- $7.50 psf per month rental projection,” JP Morgan had estimated following the redevelopment announcement. (Analysts had been a lot more excited before the Nov 15 announcement.)
Credit Suisse said it had a neutral rating for CLAR following the Science Park redevelopment. “The large size of CLAR’s asset base and small stake in the joint venture result in unexciting DPU accretion,” Credit Suisse noted
