AACI REIT acquires 49% interest in Optus Centre for S$215m

First Australian acquisition for industrial REIT.

AIMS AMP Capital Industrial REIT Management Limited (the Manager) as manager of AIMS AMP Capital Industrial REIT (AACI REIT) today announced it has entered into a conditional agreement with a Stockland managed fund, Stockland Direct Office Trust No. 2, to acquire a 49 percent indirect interest in the Optus Centre, a premium business park located at Macquarie Park in Sydney’s north, for A$184.425 million (S$215.0 million).

Optus Centre is 100 per cent leased to Optus Administration Pty Limited for a weighted average lease term of 8.6 years with fixed annual escalation of three per cent. This will increase the weighted average lease expiry of the Trust to 4.0 years from 3.0 years as at 30 September 2013 on a pro forma basis. Optus Administration Pty Limited is a wholly owned subsidiary of SingTel Optus, which is the second largest telecommunications company in Australia, and is a wholly owned subsidiary of the internationally recognised leading telecommunications group, SingTel.

The proposed acquisition represents the Trust’s first acquisition in Australia, with the Trust leveraging on the network and on-the-ground real estate expertise of the Trust’s two Australian sponsors, AIMS Financial Group and AMP Capital.

The Manager’s Chief Executive Officer, Mr Nicholas McGrath said: “This investment enables the Trust to acquire a premium asset which is accretive to the Trust, provides long-term cashflow certainty, strengthens our asset base and diversifies our portfolio with the addition of a premium business park office campus leased to Optus.

“This accretive acquisition will create significant long term growth for the Trust. Distribution Per Unit (DPU) and Distribution Yield will increase by 5.7 per cent and 5.6 per cent respectively on a pro forma basis. In addition, Net Property Income (NPI) yield will increase to 6.6 per cent from 6.3 per cent on a pro forma basis,” Mr McGrath said.

The acquisition will be fully funded by debt from a combination of existing and new debt facilities. Sixty percent (A$110.66 million) of the purchase price will be funded by a new five year AUD term loan facility, providing a substantial natural currency hedge. The balance of the purchase price will be funded by an existing dual currency SGD/AUD revolving credit facility.

The company highlighted 6 key benefits of the transaction. These include: 1) Signature maiden investment in Australia - creates geographic diversity (Australia 17.7 per cent; Singapore 82.3 per cent); leveraging the sponsors’ local real estate expertise; 2) Portfolio diversification – entry into Sydney’s business park office space; and the first freehold property – all other 25 assets in Singapore are leasehold; 3) Accretive transaction – increases DPU, Distribution yield and NPI yield on a pro forma basis; 4) Enhanced cashflow stability – boosts long term cashflow, driven by weighted average lease expiry of 8.6 years, with rental escalations of 3 percent per annum; 5) Improved debt maturity profile – weighted average debt maturity improves from 2.8 years as at 30 September 2013 to 3.4 years on a pro forma basis; and 6) Significantly increases asset base as at 30 September 2013 on a pro forma basis - grows 19.4 per cent to S$1.32 billion.

Optus has three staggered leases over the property, which are due to expire in June 2021, June 2022, and June 2023, reflecting an average weighted lease term of 8.6 years.