AA Reit inks 12-year master lease with unit of Singtel Optus

AIMS APAC Reit (AA Reit) and its joint venture partner, Stockland, have secured a new agreement with its existing master tenant Optus Administration, for a further 12-year term at the Optus Centre property in Macquarie Park, New South Wales, Australia.

Optus Administration is a wholly-owned unit of Singtel Optus, a subsidiary of Singapore Telecommunications. Singtel Optus is Australia's second largest telecommunications company.

The new lease will commence from July 1, 2021, following the completion of an asset enhancement initiative (AEI) to cater to Optus Administration's evolving requirements, AA Reit's manager said. The property will remain operational while the AEI works are being carried out.

The implied value of AA Reit's 49 per cent share in the asset, based on the valuation of A$570 million (S$528 million) is A$279.3 million, representing a 51.4 per cent increase compared to the Reit's purchase price of A$184.4 million back in 2014, the manager said. It added that this represents a pre-tax equity IRR (internal rate of return) of about 17 per cent per annum. 

Optus Centre is located at Macquarie Park in a suburb in northern Sydney, New South Wales, Australia, and is one of the largest campus style business parks in the country. Stockland owns the remaining 51-per cent stake in the asset.

The campus, located about 15 kilometres north west of Sydney's central business district, comprises six buildings with a total net lettable area of 84,194 square metres, on a land area of 75,860 sq m.

Optus Administration will continue to occupy the entire net lettable area of the campus for a period of 12 years upon the commencement of the new lease. The agreement includes an annual rental escalation of 3.25 per cent on the face rent, and two options to extend the lease for a further five years per option after the initial lease term.

Upon the commencement of the new lease, the property will provide an estimated net property income of A$28.3 million in the first year, with average net property income of A$36.5 million over the 12-year lease term, after taking into account rental escalation, the manager said. 

As at Sept 30 2019, the property represented 14.7 per cent of AA Reit's total portfolio valuation, and accounted for 6.4 per cent of the portfolio's net lettable area. Optus Administration is AA Reit's largest tenant, contributing 12.3 per cent of gross rental income for the quarter ended Sept 30. 

In a statement on Monday, the manager said the deal is the culmination of almost three years of negotiations and collaborative effort between AIMS Financial Group as sponsor, the manager, Stockland, and Optus Administration. 

Units in AA Reit closed at S$1.44 on Friday, up 1.4 per cent, or two Singapore cents.