Keppel REIT is paying A$306 million ($303.3 million) to buy Pinnacle Office Park, a freehold Grade A commercial property comprising three office buildings located within Macquarie Park in Sydney. 

With a total net lettable area (NLA) of 35,132 sm (378,165 sf) across three office buildings, Pinnacle Office Park is strategically located within Macquarie Park, which is the second largest office market in New South Wales.

Key tenants of the property include ASX-listed Aristocrat Technologies, Konica Minolta and Coles Supermarkets. 

“With an initial net property income yield of 5.25%, the acquisition of Pinnacle Office Park is in line with our active portfolio optimisation strategy to improve Keppel REIT’s income resilience and portfolio yield,” says Paul Tham, CEO of the REIT manager.

“The expansion into the Grade A metropolitan office space strengthens our portfolio as it complements our prime CBD offering,” he adds.

The property has a weighted average lease expiry of 4.8 years by NLA, and its existing leases have fixed annual rental escalations of between 3% and 4%. 

The acquisition is targeted to be completed in 4Q 2020 and will be fully funded with Australian dollar denominated debt for natural hedging. 

Upon completion of this acquisition, Keppel REIT will have an aggregate leverage of around 38.7%.

Its assets under management will grow to $8.2 billion across 10 properties in Singapore (77.0%), Australia (19.4%) and South Korea (3.6%) and its portfolio WALE will be approximately 6.9 years, while the freehold portion of the portfolio will increase from 30.3% to 37.1% by NLA.