The manager of Prime US REIT has entered into purchase agreements to acquire freehold office towers located in San Diego and Florida for a total consideration of US$245.5 million ($330.2 million).
The manager also announced the launch of a private placement to raise gross proceeds of up to US$80 million, with an upsize option for a further US$20 million, which will be used to partially finance the acquisition.
The San Diego asset, Sorrento Towers, comprises two seven-story office towers with a total net leasable area (NLA) of 296,327 square feet. The purchase consideration for Sorrento Towers amounts to US$146 million.
Sorrento Towers currently has an occupancy rate of 95.6%, with 11 tenants and a weighted average lease expiry (WALE) of 6.6 years. It has an implied capitalisation rate of 5.3% based on its latest valuation.
The Florida asset, One Town Center, is a 10-story office tower located in Boca Raton with NLA of 191,294 square feet. The purchase consideration for Sorrento Towers amounts to US$99.5 million, a 2.5% discount to its latest valuation of US$102 million.
Sorrento Towers currently has an occupancy rate of 94.7%, with 14 tenants and a WALE of 6.2 years. It has an implied capitalisation rate of 5.8% based on its latest valuation.
The total acquisition cost for the properties, including fees payable to the manager and transaction-related costs, will amount to US$247.7 million.
The acquisition marks the REIT’s entry into the two markets. Post-acquisition, Prime US REIT’s San Diego and Boca Raton exposures will respectively make up 8% and 5.8% of its enlarged portfolio by cash rental income.
See also: Prime US REIT to benefit from greater return to offices, acquisition opportunities: analysts
The acquisitions are expected to be distribution per unit (DPU) accretive, boosting DPU by 2.4%.
The total acquisition cost will be funded by a combination of loans and proceeds from the private placement.
Under the private placement, new units in Prime US REIT will be issued to institutional and other investors at an issue price ranging between 79.7 US cents to 82.2 US cents.
DBS Bank and Credit Suisse (Singapore) have been appointed joint lead managers and underwriters for the placement.
Assuming the placement upsize is not exercised, the manager of Prime US REIT intends to use US$78.1 million of the US$80 million gross proceeds to partially fund the acquisition, with the remainder to be utilised to pay the estimated fees and expenses.
Units in Prime US REIT closed 1 US cent or 1.15% higher at 88 US cents on June 23.
Photo: Prime US REIT
