Ascendas Reit to acquire Sydney suburban office property for A$288.9m

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 announced 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. It will also result in Sydney properties accounting for 48 per cent of the Australian portfolio.

"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," said William Tay, executive director and chief executive officer of the Reit's manager.

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 the property has a 93 per cent physical occupancy rate, but is 100 per cent occupied, taking into account the two-year rental guarantee provided by AMP Capital for vacant space.

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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 the approval from the Australian Foreign Investment Review Board.

Units of Ascendas Reit closed at S$2.88 on Thursday, down S$0.04 or 1.4 per cent.