Ascendas Reit to pay A$288m for Sydney suburban office property

Singapore

ASCENDAS Real Estate Investment Trust (Ascendas Reit) is planning to acquire a suburban office property in Sydney, Australia, for A$288.9 million (S$284 million) from AMP Capital, its manager said on Friday.

The proposed acquisition of 1-5 Thomas Holt Drive at Macquarie Park will be the Reit's fifth suburban office property investment in Australia, said William Tay, executive director and chief executive officer of the Reit's manager in the exchange filing.

"We are continuing to expand our suburban office portfolio in Australia as affordable satellite hubs such as Macquarie Park remain attractive for companies seeking to decentralise from the central business district," Mr Tay said.

The purchase consideration of A$288.9 million is in line with the independent market valuation of A$288.9 million as at Dec 1, 2020.

Ascendas Reit is expected to incur an estimated total transaction cost of A$19.6 million, which includes stamp duty and other fees.

The proposed acquisition will be funded by proceeds from the equity fundraising announced last month, debt facilities and/or internal resources, its manager said.

The property comprises three suburban office blocks with a net lettable area of 39,188 square metres, located on freehold land.

Ascendas Reit's manager said that the property has a 93 per cent physical occupancy rate, but is actually 100 per cent occupied, if the two-year rental guarantee provided by AMP Capital for vacant space is taken into account.

The manager said the leases are double net and have built-in annual rental escalations of 3.25 per cent to 3.75 per cent, which provide "stable organic growth" for Ascendas Reit.

Net property income yield for the first year is approximately 5.9 per cent pre-transaction costs and 5.6 per cent post-transaction costs, including the rental guarantee provided by the vendor for vacant space.

According to the manager, the annualised pro forma impact on FY2019 distribution per unit is expected to be an improvement of 0.059 Singapore cent, assuming the proposed acquisition was completed on April 1, 2019.

The completion of the proposed acquisition is expected to be in the first quarter of next year, subject to approval from the Australian Foreign Investment Review Board.

Post-acquisition, Ascendas Reit will own 37 properties in Australia, worth S$2.1 billion, with Sydney assets accounting for 48 per cent of the Australian portfolio by asset value, up from 40 per cent previously.

Units of Ascendas Reit closed at S$2.93 on Friday up 1.7 per cent or S$0.05, after the announcement.