AA Reit completes Tuas redevelopment project; estimated costs S$3m lower

AIMS Apac Reit (AA Reit) on Monday said it has completed a redevelopment project at 3 Tuas Avenue 2, and received a Temporary Occupation Permit (TOP) for the property on Jan 10.

The estimated project developments costs, including land cost and other transaction costs of S$45.2 million, is also S$3 million lower than the initial estimate, AA Reit said.

Based on a valuation by Savills Valuation and Professional Services as at Jan 10, the property's value upon the completion of the redevelopment is S$51.8 million.

The Tuas redevelopment project follows the signing of a master lease agreement with a US global medical device company in July 2019.

The tenant has committed to a 10-year master lease on a triple net lease basis, with rental escalations every two years during the initial term, and options to renew the lease for up to a further 20 years after the expiry of the initial 10-year term.

BT reported last July that the Tuas property, originally projected to have its redevelopment completed in the second half of 2019, would be completed in the first half of 2020 due to redesigning of the property's base-build to cater for the master tenant's operational requirements. This, however, will not have a material impact on the overall redevelopment cost of the property, AA Reit noted then.

The property is expected to provide an initial net property income of about S$3.8 million for the first year, with an approximate initial net property income yield of 8.3 per cent based on the estimated development cost.

Rental income is expected to commence around the end of financial year ending March 31, 2020, AA Reit said.

The design-and-build redevelopment project began in May 2018 and transformed the asset into an industrial facility suitable for production and storage.

3 Tuas Avenue 2 is located within Jurong Industrial Estate, near Pan Island Expressway and Ayer Rajah Expressway. The property is also within walking distance to Tuas Crescent MRT station.

Koh Wee Lih, chief executive of AA Reit's manager, said the redevelopment of the Tuas property is in line with the Singapore government's masterplan to develop and upgrade the Tuas region into a "high performing industrial district", and has enabled the Reit to capture the growth in demand for industrial space.

Units of AA Reit ended one Singapore cent, or 0.68 per cent lower at S$1.45 last Friday.