AIMS APAC REIT (AA REIT) says its trustee, HSBC Institutional Trust Services, through the REIT’s wholly-owned sub-trust has entered into a put and call option agreement to acquire 315 Alexandra Road from Aster (Alexandra) for a consideration of $102.0 million.
The property is anchored by Sime Darby Property Singapore, a wholly-owned unit of Sime Darby Property Berhad, and will be acquired at an initial net property income (NPI) yield of 6.2%.
The building is a five-storey light industrial building that was originally built in the 1960s and expanded to include the three-storey annex building at the back.
The property will be acquired with its anchor tenant on a partial leaseback structure, where Sime Darby Property Singapore will lease back 70% of the property’s total gross floor area (GFA) for 10 years.
The arrangement includes fixed annual rental escalation, and a four-year lease renewal option at the prevailing market rate.
The property is valued by Savills at $104.7 million.
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The proposed acquisition is estimated to cost AA REIT some $106.6 million, including transaction costs.
Upon completion, the acquisition will increase AA REIT’s light industrial exposure to 15.8% from 11.7%. It will also increase its portfolio occupancy to 95.0% from 94.5%.
The REIT’s weighted average lease expiry (WALE) will be extended to 4.52 years from 4.23 years.
The proposed acquisition is said to be fully funded by debt, comprising a new term loan and existing debt facilities, bringing the REIT’s aggregate leverage to 39.0%, within MAS’s limit of 50%.
It will also add 0.48 cents to the FY2020 distribution per unit (DPU) of 9.50 cents to 9.98 cents on a pro forma basis.
“The proposed acquisition marks a first for AA REIT in acquiring a light industrial asset in the city-fringe area, where such assets are tightly-held amongst owners and investors. This will be a strategic fit for AA REIT, adding a centrally-located and highly coveted light industrial building to the portfolio. The acquisition will provide immediate DPU accretion, long-term income stability and diversity to the REIT,” says Koh Wee Lih, CEO of the manager.
“This also reaffirms AA REIT’s growth strategy of seeking yield accretive opportunities in the industrial and light industrial market, including logistics facilities and warehouses – a resilient asset class amidst the current market conditions,” Koh adds.
Units in AA REIT closed 1 cent lower or 0.8% down at $1.29 on Jan 27.
