Aims Apac Reit to acquire Woolsworth HQ in Sydney for A$463m

THE manager of Aims Apac Reit (AA Reit) O5RU : O5RU 0%on Thursday announced that it is acquiring the headquarters of Australian supermarket and grocery chain Woolworths for A$463.3 million (S$454 million).

Including transaction costs such as stamp duty, acquisition fee payable to the manager, the total acquisition cost will come up to A$494.3 million - considerably higher than the A$336.5 million that South Korea's Inmark Asset Management paid for the property in 2016.

But the way chairman of the manager George Wang sees it, the asset, which will be the largest in AA Reit's portfolio, will be a "transformational acquisition" for the Reit. "This proposed acquisition will strengthen AA Reit's foothold in Sydney's resilient business park market," he said.

The purchase consideration for the property is in line with an independent valuation conducted by Knight Frank NSW Valuations and Advisory, which valued the property at A$463.3 million as at Sept 30.

Built in 2005, the Woolworths headquarters property is a corporate campus comprising three interconnecting buildings, which house A-grade office accommodation, a data-centre operation, and amenities.

It sits on a total site area of 90,010 square metres (sq m), with a total net lettable area (NLA) of 44,972 sq m. Based on the maximum allowable gross floor area, the Reit manager said the current NLA provides for significant development potential to around 180,000 sq m.

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The property is fully leased to Woolworths, with 10 years left on the lease term, subject to built-in rental escalation of 2.75 per cent per annum.

Post-acquisition, Woolworths will become the largest tenant in AA Reit's portfolio. The proposed acquisition will significantly enlarge AA Reit's portfolio value by over 26.6 per cent to S$2.18 billion.

It will also raise the contribution of the Reit's Australian freehold properties from 21.8 per cent to 38.4 per cent.

The property will be acquired at an initial net property income (NPI) yield of 5.17 per cent, based on the property's NPI of A$23.9 million in the first year of ownership over the purchase consideration of A$463.3 million.

Based on the estimated total acquisition costs of A$494.3 million, the initial NPI yield would be 4.84 per cent.

The Reit manager said the proposed acquisition is also expected to be distribution per unit (DPU) accretive.

The manager said it has "sufficient capacity" to complete the transaction, with net proceeds raised from the recent issuance of the S$250 million perpetual securities and a local debt-financing package secured for 60 per cent of the purchase consideration.

It added that it may also consider funding the proposed acquisition by a combination of debt financing, acquisition fee units, net proceeds raised from the issuance of the perpetual securities and new equity.

With the proposed acquisition, AA Reit's aggregate leverage will increase to 38.6 per cent.

The manager said that at this aggregate leverage, the proposed funding structure utilising local debt financing and perpetual securities is expected to increase to 9.37 Singapore cents on a pro forma historical basis for FY2021. This is up 0.42 cents from the FY2021 DPU of 8.95 cents.

Upon settlement, the manager has elected to receive the acquisition fee in AA Reits units, it added.

Units of AA Reit closed S$0.01 or 0.7 per cent higher at S$1.44 on Thursday, before the announcement.

READ MORE

• AA Reit is one to watch on potential corporate action, say analysts

• AA Reit in exclusive due diligence to acquire Woolworths HQ in Sydney