AA REIT to acquire site at Jurong Innovation District for $129.6m

Upon completion, rental contribution from master leases is slated to rise from 30.3% to 36.4%.

AIMS APAC REIT (AA REIT) has entered a put and call option agreement to acquire a logistics facility at 7 Bulim Street for $129.6m from Titan (Wenya), a press release revealed.

HSBC Institutional Trust Services (Singapore) was appointed as the trustee of AA REIT for the deal. The property, fully leased to KWE-Kintetsu World Express (KWE), will be acquired at an initial net property income (NPI) yield of 7.07%.

It will be acquired with an existing master lease to KWE, a wholly-owned subsidiary of a major Japanese freight forwarding and logistics group. The existing lease commenced on 1 January 2014 for a term of 10 years, with a five-year option for the master tenant to renew its lease at the then prevailing market rate by 30 June 2023.

The purchase consideration is said to be in line with an independent valuation conducted by Savills Valuation And Professional Services, which valued the site at $130m as at 7 August. The total cost of the proposed acquisition is estimated at approximately $135.5m, comprising the purchase consideration of $129.6m and transaction costs of around $5.9m.

The acquisition is expected to enhance AA REIT’s portfolio upon completion, increasing its logistics and warehouse cluster from 46.4% to 51.1%, as well as greater rental contribution from master leases from 30.3% to 36.4%. Overall portfolio occupancy rate also will improve from 93.6% to 94.2% on a pro forma basis.

The deal is proposed to be funded by a combination of the net proceeds from the issuance of perpetual securities of $123.5m and debt financing of $12m. On a pro forma funding structure of perpetual securities and debt financing, the proposed acquisition will add 0.18 cents to the FY2020 distribution per unit (DPU) of 9.50 cents to 9.68 cents on a pro forma basis.

Following the completion of the logistics site, AA REIT will have a total of 28 properties, of which 26 properties are located throughout Singapore, a property located in Gold Coast, Queensland, Australia and a 49% interest in a property located in Macquarie Park, New South Wales, Australia.