AA Reit to divest factory building in Soon Lee Road for S$8.17 million

THE manager of AIMS AMP Capital Industrial Reit (AA Reit) is divesting a factory building in Jurong Industrial Estate for S$8.17 million.

It announced on Monday that it had entered into an agreement for the divestment of the property at 10 Soon Lee Road through its trustee HSBC Institutional Trust Services (Singapore) on Jan 12.

The sale price of S$8.17 million represents a 28 per cent premium over the property's latest valuation of S$6.4 million.

Net proceeds from the divestment will be used to pare down existing debt to reduce aggregate leverage and create additional debt headroom for future acquisitions, asset enhancement initiatives or development opportunities, said the manager in a bourse filing after markets closed.

The property at 10 Soon Lee Road - purchased during AA Reit's initial public offering in April 2007 - contributed 0.8 per cent of the annual gross rental income for the financial year ended March 31, 2017.

It sits within an established industrial estate on the southern side of Soon Lee Road, off International Road in the Jurong Industrial Estate, and has a net lettable area of 7,224.2 square metres over a detached single-storey industrial building and a four-storey industrial building with an ancillary office block.

The property has a remaining land lease tenure of less than 24 years.

It is AA Reit's smallest asset and the only property in AA Reit's portfolio that is valued below S$10 million.

The sale is subject to approval by JTC Corporation and is expected to be completed by the end of the current financial year.

Koh Wee Lih, chief executive of the manager, said that a strategic review of the portfolio shows that the property is ready for divestment.

"This is in line with our capital recycling strategy and will give us enhanced financial flexibility, allowing us to further strengthen AA Reit's balance sheet and capital structure."

Following the divestment, AA Reit's portfolio will consist of 26 properties in strategic industrial hubs across Singapore and in New South Wales, Australia. Portfolio occupancy rate will increase from 88.8 per cent as at Sept 30, 2017 to 89 per cent on a pro forma basis.

With the divestment and AA Reit's recent S$55 million private placement, its aggregate leverage will also decrease from 37.3 per cent as at Sept 30, 2017 to 33.3 per cent on a pro forma basis.

AA Reit closed unchanged at S$1.36 on Monday, before the announcement was made.