Low pre-commitment rate burdens Ascendas REIT's $458m acquisition of Aperia

Less than half of the units are committed.

A new mixed-use development is joining Ascendas REIT’s portfolio. On Friday, the developer revealed that it is acquiring Aperia, a newly-completed integrated mixed-use development in Kallang iPark for a total transaction value of S$458m.

According to CIMB, Aperia is a good-quality asset burdened with a disappointingly low pre-commitment rate, as it only has a commitment rate of 46%, or 61% if the advanced-negotiations potential tenants are included.

“The current low pre-commitment rate is slightly disappointing. On this basis, coupled with a later-than-expected acquisition timeline, we have tweaked our earnings estimate downward for FY15 and FY16 by 3.1% and 1.7%, respectively. Having said that, the negativity has been partially factored in by the discount of 6.1% from the valuer’s indicated valuation. Given the locality and quality of this asset, we agree that this asset could be a growth driver for AREIT in the long run,” noted the report.

Here’s more from CIMB:
Upon completion of this acquisition, the portfolio-weighted land lease tenure will rise to 47.2 years from 46.4 years.

Based on our calculations, together with a previously-guided indicative yield of 6.1%, DPU is expected to grow by c.4% on a stabilised basis.

In terms of funding, this acquisition will be funded mainly (c.60%) through proceeds raised from the private placement of 160m units announced on 8 Mar 2013 and the balance will be funded by debt. Upon completion, AREIT’s leverage ratio is expected to rise from 31.6% to 34%.