Ascendas Reit to acquire 11 logistics properties in Kansas City for S$207.8m

ASCENDAS real estate investment trust (Reit) A17U : A17U 0% has proposed the acquisition of 11 logistic properties located in Kansas City, United States for S$207.8 million.

The acquisition will be the Reit's first entry in the US logistics market, the Reit's manager said in a bourse filing on Friday (Oct 22).

The portfolio is 92.6 per cent occupied by 27 customers from industries including third-party logistics, wholesale distribution, manufacturing and healthcare. It has a strong retention rate, with current tenants in place for an average of 12.5 years, the Reit's manager noted.

It also has minimal tenant concentration risk, with no single customer contributing to more than 10 per cent of total rental income as at Sep 30, 2021, and the current leases have built in annual rental escalations ranging between 2.5 per cent and 3 per cent.

The properties are in infill locations across the submarkets of South Johnson County, North Johnson County, Eastern Jackson County and Northland. These submarkets house around 70 per cent of the overall inventory in the Kansas City market, the manager said.

William Tay, executive director and chief executive officer of the manager, expects there will be continuous high demand for this portfolio as it provides convenient access to the domestic market, midwestern population centres and other commercial hubs in the US.

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He said: "We are confident of the growth potential of this portfolio given Kansas City's geographically central location within the US and its well-developed transportation infrastructure."

The Reit's manager intends to redeploy the proceeds from its recent divestment of 3 logistics properties in Australia to partially fund the acquisition. The remaining balance will be financed through existing debt facilities.

On a pro forma basis, the manager expects the acquisition will increase the proportion of logistics properties to 22 per cent of Ascendas Reit's total investment properties of S$16.2 billion, from 21 per cent as at Sep 30, 2021.

Assuming the acquisition had been completed on Jan 1, 2020, distribution per unit for FY 2020 will likely also improve by S$0.0011, on a pro forma basis. (see amendment note)

The completion of the acquisition is subject to closing conditions and is expected to take place in Q4 2021.

Units of Ascendas Reit closed at S$3.06 on Thursday (Oct 21), up S$0.02 or 0.7 per cent.

READ MORE: Ascendas Reit posts 3.7% rental reversion in Q3, expects single-digit positive figure for full year

Amendment note: An earlier version incorrectly stated the DPU will likely improve by S$0.11, when it is in fact S$0.0011.