AIMS APAC REIT acquires largest asset Woolworths HQ

The acquisition will grow its AUM by 26.6% to $2.1b.

AIMS APAC REIT's (AAREIT) acquisition of Woolworths HQ in Sydney is set to bring growth to the company, DBS Research reported.

Through this acquisition, the company's Assets Under Management will increase by 26.6% to $2.1b, making it the largest asset in the company’s portfolio.

Included in the acquisition are terms that include four lease extension options of five years each. 

This acquisition will also increase AAREIT’s exposure to freehold assets by 38.4%, whilst business parks will make up 40% of the company’s portfolio.

The report also compared the potential net property income (NPI) yield to AREIT’S and KREIT’S business park acquisitions in Macquarie Park, Sydney.

“In our view, the NPI yield of 5.17% (4.84% including transaction costs) seems tight, especially when compared against the yields of 5.5%-6.0% for AREIT’s and KREIT’s business park acquisition in Macquarie Park, Sydney. However, we note that cap rates have compressed since then, and a slight premium on Woolworths HQ is justified given the long lease to one of Australia’s largest and most reputable company.”

The acquisition will also result in 4% accretion to distribution per unit, with the timing difference between the issue of the perpetual securities and completion of acquisition leading to a dilution in AAREITs FY22F earnings.

Some of the other major effects of this acquisition include a high annual rental escalation of 2.75% per annum, the potential to increase NLA by four times and an expected increase in gearing to 39%.