ASEAN Conference 2023: Diversification strength

2023-08-23 09:27:54.160 GMT

Abstract:
Multi-asset portfolio steered towards growth sectors. These are business space
and life sciences (47% of AUM), logistics (26%) and data centres (7%), which
are geared to structural trends like e-commerce and digitalisation. CLAR
completed S$515m of acquisitions in 1H23 (including The Shugart in Singapore
for S$232m at 8.3% NPI yield), and just last week, its fifth UK data centre
facility (for S$209m at a +0.7% DPU accretion).Sanguine on outlook for its US
AUM. Management said work from home trends in San Francisco have hurt occupancy
but its two office assets are backed by long 5/10-year WALEs. Its Portland
assets have benefited from flight-to-quality and smaller space needs from tech
tenants, while demand from life science in San Diego is strong and allowed it
to improve yield on a property to 9% (from 6-7%) post-conversion; a gap remains
between its rents to market rents.Focusing on growth in existing core markets.
It views the risk-return profiles of each overseas market as similar to
Singapore, with its properties in Australia, UK/Europe and the US also
typically backed by freehold land titles. CLAR thinks an expansion into Japan
or Korea is unlikely in the near-term despite favourable market fundamentals,
unless it can quickly gain meaningful scale.Interest rate rise remains
manageable. Its weighted average all-in debt cost was +80bps HoH to 3.3% at
end-Jun 2023 and could increase further by 10-20bps in 2H23. CLAR's fixed rate
borrowings is high at c.82%, and it estimates a +100bps rate increase on
variable rate debt and refinancing cost to impact its DPU (pro-forma) by -1.8%
and -1.0% respectively.Balance sheet healthy, downside cushioned. It thinks cap
rates for its suburban office assets in Australia and US could expand by
30-35bps YoY, with signifiant room for valuation to fall for gearing to reach
50%. This is backed by improving portfolio performance, from high occupancy and
expected high single-digit rent reversion. It does not expect to raise new
equity, as it has a S$1.0b debt headroom (to 40% gearing) to fund additional
deals.

Copyright 2023 macquarie

-0- Aug/23/2023 09:27 GMT

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