ESR-LOGOS Reit : J91U 0% is divesting seven industrial properties in Singapore and Australia for about S$337 million in total, its manager said in a bourse filing on Friday (Jun 23).

The properties include a portfolio of five non-core assets in Singapore, which will be divested for S$313.5 million in total, representing a 5.1 per cent discount to the portfolio’s latest valuation of S$330.4 million.

Another property, 22 Chin Bee Drive, will be divested for S$13.8 million, or at a 6.2 per cent premium over the property’s valuation of S$13 million as at last Dec 31.

The property in Jurong has a gross floor area of 11,209 square metres (sq m). As at end-March, it had just under 12.5 years on its land lease.

Separately, the sale consideration of 51 Musgrave Road in Australia amounts to A$10.8 million (S$9.7 million), which represents a 2.4 per cent premium over its valuation of S$9.5 million as at Dec 31, 2022.

Sitting on freehold land, the property has a total net lettable area of 9,485 sq m.

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The manager expects net proceeds after divestment costs for all seven properties to be S$322.4 million.

The net proceeds may also be recycled to fund higher-quality new-economy assets and upcoming asset-enhancement initiatives and redevelopment works, said the manager.

In February, the real estate investment trust (Reit) launched a S$300 million equity fundraising exercise to fund future acquisitions, redevelopments and asset-enhancement initiatives. It also divested Pandan Logistics Hub for S$43.5 million.

Assuming that net proceeds from its equity fundraising and divestments are fully used to repay existing debt, the Reit’s FY2022 pro forma gearing will fall to 33.6 per cent, from 41.8 per cent as at Dec 31, 2022.

This would also bring the Reit’s debt headroom to about S$996.4 million, from S$305 million as at Dec 31, 2022.

“This significant debt headroom would enable ESR-Logos Reit to recapitalise for growth in a timely environment, as asset valuations begin to correct and improve our portfolio quality with in-demand new-economy assets,” said Adrian Chui, chief executive officer and executive director of the manager.

The completion of the Reit’s proposed divestments would also result in its weighted average lease expiry as at Mar 31, 2023, to rise to 3.3 years, from 3.2 years.

Its portfolio weighted average land lease expiry will go up to 37.9 years, from 37.1 years as at Mar 31, 2023.

The manager said the proposed divestments of 22 Chin Bee Drive and 51 Musgrave Road will likely be completed in the third quarter of 2023.

Meanwhile, it expects the divestment of the following to be completed in Q3 2023: 3 Pioneer Sector 3; 21 Changi North Way; and 30 Toh Guan Road. The divestment for 4 and 6 Clementi Loop, and 6 Chin Bee Avenue will be completed in Q4 2023.

ESR-Logos Reit units closed 1.5 per cent lower at S$0.32 on Friday.