The manager of AIMS APAC REIT is looking to acquire the Woolworths Headquarters (HQ) at a purchase consideration price of A$463.25 million (around $454.0 million).
The total transaction cost, including stamp duties, the acquisition fee payable to the manager and professional advisory fees, would amount to A$494.25 million.
Located in New South Wales, Australia, the property - which is currently held by Inmark Asset Management and fully leased to the Woolworths Group – will be acquired at an initial net property income (NPI) yield of 5.17%.
The property comprises of three inter-connected buildings: an A-grade office accommodation, a data center operation and other amenities.
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The largest supermarket retailer in Australia, Woolworths Group has a market capitalisation of A$50 billion. The company also holds a BBB long-term and A-2 short-term issuer credit ratings by S&P Global Ratings and rated Baa2 (stable outlook) from Moody’s.
Its balance lease term of 10 years is subject to built-in rental escalation of 2.75% per annum.
Chairman of AIMS APAC REIT’s manager George Wang says the acquisition is in line with AA REIT’s investment strategy to buy quality assets that generate attractive long-term total returns for unitholders.
He believes the proposed acquisition will strengthen AA REIT’s foothold in Sydney’s resilient business park market.
“The asset sits on a rare nine-hectare freehold land, within the Norwest Business Park, with good connectivity and direct access to the Sydney CBD. The precinct is also home to a thriving community of established domestic and multinational corporations such as Australia Post, Resmed, IBM and Optus and data centres for the Reserve Bank of Australia and Commonwealth Bank of Australia,” elaborates Wang.
Constructed in 2005, the Woolworths HQ has a total site area of 90,010 square meters, with a total net lettable area (NLA) of 44,972 sq m.
The current NLA provides for significant development potential to around 180,000 sq m based on the maximum allowable gross floor area.
The property has undergone significant capital investment over the years, with progressive upgrades made to its office fit-outs and amenities.
Other refurbishments include the installation of solar panels on the roof of the building as well as the construction of a new multi-storey carpark with a capacity of 1,000 parking bays.
Following the acquisition, Woolworths will become the largest tenant in AA REIT’s portfolio.
“The property acquisition will significantly enlarge our portfolio value by over 26.6% to $2.183 billion as well as raise the contribution of Australian freehold properties to AA REIT’s portfolio, from 21.8% to 38.4%,” says Wang.
He adds that the fully occupied property and its WALE (weighted average lease expiry) of 10 years will provide additional resilience to the portfolio by lifting the overall occupancy rate to 95.9% and WALE from 3.98 years to 4.92 years on a pro forma historical basis for FY2021.
60% of the purchase consideration will be settled with a competitive local debt financing package the manager has secured. The remaining amount will be covered with the net proceeds raised from the recent issuance of $250 million perpetual securities.
The manager may also consider funding the proposed acquisition with a combination of debt financing, acquisition fee units, net proceeds raised from the issuance of the perpetual securities and new equity.
The manager’s final decision regarding the method of financing will be “made at an appropriate time [after] taking into account the prevailing market conditions”
With the proposed acquisition, the aggregate leverage will increase to 38.6%, which remains well within the MAS aggregate leverage limit of 50%.
At this aggregate leverage, the proposed funding structure utilising local debt financing and perpetual securities is expected to add 0.42 cents to the FY2021 Distribution Per Unit (DPU) of 8.95 cents to 9.37 cents on a pro forma historical basis or FY2021. Upon settlement, the manager has elected to receive the acquisition fee in AA REIT units.
AA REIT will have 29 properties, following the completion of the proposed acquisition.
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Of this, 26 properties are located throughout Singapore. The REIT also has a property in Gold Coast, Queensland, in Bella Vista, New South Wales, and holds a 49% stake in a property located in Macquarie Park, New South Wales.
Units in AIMS APACE REIT closed up a cent or 0.699% at $1.44 on Sep 30, before the announcement.
Cover image of Woolworths HQ: AIMS APAC REIT
