By all accounts, AIMS APAC REIT (AA REIT) appears to be making a transformational acquisition. At a price tag of A$463.2 million, or A$494 million including fees and other expenses, the Woolworths Headquarters outside of Sydney ticks all the boxes. The Property is wholly-leased to Woolworths for around 10 years, with up to 20 years extension options. The lease is accompanied by fixed rent step-ups at 2.75% pa. As a double-net leased property, the outgoings obligations are fully covered by the tenant.

Furthermore, Woolworths has spent A$50 million in capex for AEIs. For instance, the recent installation of new solar panels across the building roof areas provides the property with a sustainable and renewal energy source.

AA REIT’s assets under management will rise from $1.7 billion to $2.18 billion. Based on a funding combination of $207.5 million from perpetual securities raised in Aug at 5.375%, and debt of $272.4 million, the DPU accretion is likely to be 4.69%, taking pro forma DPU to 9.37 cents, from 8.95 cents recorded in FY2021 for the 12 months to March 31. “This is a Woolworths anchored asset and the cash flows are very secure. Ultimately, when we look at the combination of debt funding, which is just under 2%, it’s is a very attractive yield spread that we are achieving,” notes Russell Ng, incoming CEO of AA REIT’s manager.

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