K-REIT Asia buys 50% stake in premium grade office building in Sydney

The property is amounted to up to S$223.3mn and fully-equipped with state-of-the-art facilities.

K-REIT Asia Management Limited, as Manager of K-REIT Asia, announced that RBC Dexia Trust Services Singapore Limited, in its capacity as the trustee of K-REIT Asia has entered into an agreement with Mirvac Property Trust (the "Vendor") for the acquisition of a 50% interest in Mirvac 8 Chifley Trust, which owns 8 Chifley Square, Sydney, Australia (the "Property").

The Property is a 30-storey premium grade commercial building currently under development and is scheduled for completion in the third quarter of 2013. It is located in the heart of Sydney's Central Business District ("CBD") at the junction of Hunter Street and Elizabeth Street. The Property will have an estimated 205,700 square feet of net lettable area when completed, according to a Keppel report.

The Property is targeted to achieve a 6 Star Green Star rating by the Green Building Council Australia and a 5 Star National Australian Built Environment Rating System ("NABERS") energy rating, both the highest in their respective categories. Through the application of state-of-the-art green technologies and effective water reduction, reduced emissions of CFCs and the use of sustainably-sourced materials, the Property will have 75 per cent less carbon emissions than those of a typical Sydney CBD office building.

The Acquisition will be at a price ranging from A$154.4 million (S$203.0 million) to A$169.8 million (S$223.3 million) depending on the committed rental rates of the leases when the Property is completed, subject to a maximum cap at A$169.8 million.

K-REIT Asia's unitholders can expect to benefit from the Acquisition as there will be quarterly coupon distributions payable to K-REIT Asia until the building is completed. The Acquisition is expected to provide an incremental distribution per unit of 0.07 cents, an accretion of 1.1% on a pro forma basis for the financial year 2010. In addition, there will be a five-year rental guarantee from the Vendor in the event that the Property is not fully leased at the pre-agreed rental rates on completion.

Ms Ng Hsueh Ling, CEO of K-REIT Asia Management Limited, said, "The forward funding structure gives unitholders income on a regular basis from day one of the acquisition. The income from this acquisition is expected to increase as we progressively pay for our 50% interest during the term of the development."

"We are pleased to establish a strategic relationship with the Mirvac Group and acquire a 50% interest in this quality development. We are confident that 8 Chifley Square will be in demand by leading corporations which value both the prime location and the premium quality of the building," Ms Ng said.

The Acquisition will be funded progressively until its expected completion date in the third quarter of 2013. K-REIT Asia is expected to have an aggregate leverage of 39.8% after drawing on available credit facilities to fund the down payment for the Acquisition.

K-REIT Asia (Australia) Trust will co-own the Property with Mirvac Property Trust, a member of the Mirvac Group, which will be retaining the other 50% interest in the Property. The Mirvac Group is one of Australia's leading real estate companies listed on the Australian Securities Exchange managing approximately A$8.8 billion of assets.