The Motley Fool

This REIT Stands To Benefit from a New S$1.5 Billion Development Project in Iskandar Malaysia

For a few years now, the development of Iskandar Malaysia has led to even closer economic ties being formed between Southeast Asian neighbours Singapore and Malaysia.

One of the major projects in the area is a joint venture between Ascendas and Malaysia’s largest property developer, UEM Sunrise. Last Thursday, the JV had just broke ground for the Nusajaya Tech Park, a huge, new integrated industrial and technology park that will span 210 hectares. The entire project, which would be completed within a decade, has a development value of around S$1.5 billion.

UEM Sunrise is the largest property developer in Malaysia and one of the largest land owners of Iskandar Malaysia. Majority owned by the Malaysian government, the company has aspirations to become a real estate outfit like CapitaLand (SGX: C31).

Meanwhile, Ascendas is one of Asia’s largest providers of business space solutions. It is also the sponsor to a few trusts listed in Singapore that include Ascendas REIT (SGX: A17U), Ascendas India Trust (SGX: CY6U) and Ascendas Hospitality Trust (SGX: Q1P).

Ascendas REIT’s portfolio is mainly comprised of business parks and industrial properties while Ascendas India Trust has similar types of real estate but with a focus on only India. Elsewhere, Ascendas Hospitality Trust is a business trust with more than 10 hospitality properties in Australia, China, Japan and Singapore.

Possible synergy with Ascendas REIT

Although most of the properties developed in the Nusajaya Tech Park will be up for sale, there’s a possibility that Ascendas might consider holding on to some of them for investment purposes; after all, firms in Singapore already have a big interest in setting up a presence in Iskandar Malaysia.

If Ascendas does decide to keep some properties for investment purposes, it would then make sense for Ascendas REIT to play a major role in the management of these properties. After all, Ascendas REIT has a long and successful track record of managing business and industrial spaces. Furthermore, it already has a long list of ready clients who might be interested in leasing these properties as well.

Foolish Summary

At last count, Ascendas REIT already has 103 industrial properties in its portfolio and can be considered one of the largest industrial property owners in Singapore. But, with the development of Nusajaya in Iskandar Malaysia by Ascendas and UEM Sunrise, the REIT might just have a new engine for growth and diversification.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.