Suntec REIT is paying the Canada Pension Plan Investment Board £430.6 million ($756 million) for the latter’s 50% stake in two Grade A office buildings with ancillary retail at London’s West End.
The remaining 50% interest in Nova Properties, which includes Nova North, Nova South and The Nova Building, will continue to be held by UK-listed Land Securities Group, the developer and asset manager of the Nova Properties.
Chong Kee Hiong, CEO of Suntec REIT’s manager, calls the acquisition of Nova Properties a “strategic fit” to Suntec REIT’s existing portfolio in Singapore and Australia.
“These two premium Grade A office buildings will enhance the resilience, diversification and quality of Suntec REIT’s portfolio with income contribution from high quality office tenants and long weighted average lease expiry of 11.1 years,” he says.
Chong notes that the net property income yield of 4.6% will provide a DPU accretion of 4.9% upon completion of the acquisition in December 2020.
There is also a 2-year guarantee on the retail income which will provide rental protection to ride out the current pandemic, he adds.
With the acquisition of Nova Properties, Suntec REIT’s assets under management will grow from $10.7 billion to $11.5 billion across a total of 10 properties in Singapore (77.2% of AUM), Australia (16.1%) and the United Kingdom (6.7%).
See also: Suntec REIT supported by rental assistance, Australia acquisitions: OCBC
The REIT’s office portfolio weighted average lease expiry will be lengthened to 4.4 years while the retail portfolio weighted average lease expiry will be extended to 2.8 years.
The acquisition is likely to be funded by GBP and SGD denominated loans. Suntec REIT will be calling for an EGM in December to ask unitholders to give this deal the go-ahead.
Completed in 2016 and 2017, the Nova Properties is the newest large-scale addition to the West End. It has a total net lettable area of approximately 559,000 sq ft and a long leasehold tenure of 1,042 years.
The Nova Properties are 100% occupied by quality office tenants from diversified sectors with a weighted average lease expiry of 10.6 years.
The strong income stream from the office tenants constitute approximately 90% of Nova Properties’ total rental income. Key office tenants include Atkins, The Argyll Club, a government ministry, Vitol and BlueCrest.
Landsec, the joint venture partner for the other 50% interest in Nova Properties, is one of the largest commercial property development and investment companies in the United Kingdom. Listed on the London Stock Exchange, Landsec owns and manages approximately 24.0 million sq ft of space with a combined portfolio value of £12.8 billion.
ARA Dunedin has been appointed by the manager of Suntec REIT to manage the property.
