UI Boustead REIT (SGX:UIBU
) announced that it has entered into various agreements to coinvest in the development of a build-to-suit aerospace facility worth $104 million at the Seletar Aerospace Park in Singapore.
The facility will be developed by the REIT with the engineering, procurement and construction management contract undertaken by Boustead Projects E&C, which is a subsidiary of Boustead Singapore Limited (SGX:F9D) .
Meanwhile, the facility is expected to be fully leased to a leading global aerospace corporation on a long-term lease of approximately 22.5 years with in-built rental escalations.
UI Boustead REIT will hold 51.0% interest in the facility, while a subsidiary of Boustead Singapore Limited holds the remaining 49.0% interest
In addition, UI Boustead REIT has the option to fully purchase the remaining 49.0% interest upon the receipt of temporary occupation permit (TOP).
Given UI Boustead REIT’s 51% interest, its share of the estimated effective total investment value is approximately $53.9 million, of which the required capital commitment is approximately $17.9 million.
The REIT manager explains that as the project costs is to be funded progressively over the development period, it intends to finance the amount with internal funds, existing debt facilities or both.
Pro forma aggregate leverage will increase from 37.9% to 39.7% at the completion of the Development when the capital commitment is fully funded, assuming funded by external borrowings.
“This underscores UI Boustead REIT’s uniquely differentiated growth strategy of undertaking co-investment opportunities in partnership with our Sponsor, enabling the REIT to invest at the development stage which enhances value accretion on a risk-mitigated basis for Unitholders,” says Tan Shu Lin, CEO of the manager.
Units of UI Boustead REIT closed 0.5 cents higher, or 0.65% up at 78 cents on May 22.
Shares of Boustead Singapore Limited closed 4 cents higher, or 1.68% up at $2.42 on May 22.
