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Ascendas Real Estate Investment Trust (A-REIT) will acquire 26 logistics properties in Australia for A$1.013 billion (S$1.013 billion) from the real estate arms of Frasers Property Australia and GIC.
Set to be completed in Q4 2015, the proposed acquisition marks A-REIT’s first acquisition of a logistics portfolio in Australia.
Aside from diversifying A-REIT’s portfolio geographically, the acquisition will also establish A-REIT as Australia’s eighth largest industrial landlord, said Tan Ser Ping, executive director and chief executive officer of Ascendas Funds Management, A-REIT’s manager.
Meanwhile, Swiss financial institution Credit Suisse noted that all assets are on freehold titles of which nine each are located in Melbourne and Sydney, one in Perth and seven in Brisbane.
The portfolio comes with an average weighted average lease expiry (WALE) of 6.1 years and will lengthen AREIT’s portfolio WALE to 4.0 years from 3.7 years, it said.
“Additionally, it will enhance the REIT’s customer base to include high quality tenants such as Wesfarmers, Mondelēz, Pacific Brands, API, Nestlé and Officemax. The assets will be on a triple net lease with a fixed annual escalation of +3.3 percent built into the leases which will provide stability and growth.”
It added that the portfolio comes at a “rich” acquisition yield of 6.4 percent (6.0 percent yield on total cost) given that the range of recent industrial transaction stands at between 6.0 and 9.0 percent.
Management intends to fund the acquisition through “a 60:40 combination of three to five year AUD debt (3.5-4.0 percent interest cost) and perpetual securities (~4.5 percent interest cost) implying a funding cost of ~4.2 percent.”
Post-acquisition, the Australian portfolio will account for 11.3 percent of AREIT’s portfolio.
“This is about half way towards management’s target of growing its mature market exposure to 20-30 percent of total portfolio, implying that AREIT could look to acquire another S$1-2 billion worth of mature market assets going forward,” said Credit Suisse.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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