Ascendas Real Estate Investment Trust (Ascendas Reit) is buying a Sydney suburban office property for A$288.9 million ($284 million) from AMP Capital.
The property, at 1 – 5 Thomas Holt Drive, Macquarie Park will be Ascendas’ fifth suburban office property investment in Australia. With this acquisition, Sydney accounts for 48% of its Australian portfolio.
“We are continuing to expand our suburban office portfolio in Australia as affordable satellite hubs such as Macquarie Park remain attractive for companies seeking to decentralise from the central business district,” says William Tay, executive director and CEO of the REIT’s manager.
The property consists of three suburban office blocks with a net lettable area of 39,188 square metres, located on freehold land.
It is now fully occupied with a long weighted average lease to expiry (WALE) of 4.5 years, which will lengthen the Australian portfolio’s WALE from 4.3 years to 4.4 years.
The leases are double net and have built in annual rental escalations of 3.25% to 3.75% providing stable organic growth for Ascendas Reit.
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Key tenants include Australian companies wholesale distribution and marketing company Metcash and Foxtel, a joint venture of Nasdaq-listed media giant News Corporation and Australia’s incumbent telco Telstra.
Ascendas will incur an estimated total transaction cost of $19.3 million including stamp duty, professional advisory fees, and acquisition fees of $2.84 million to be paid to the REIT manager in cash.
The acquisition is expected to generate first year net property income yield of 5.9% and 5.6% pre-transaction costs and post-transaction costs respectively.
The annualised pro forma impact on FY2019 distribution per Unit (DPU) is expected to be an improvement of 0.059 Singapore cents assuming the proposed acquisition was completed on April 1 2019.
Ascendas REIT plans to fund the acquisition using proceeds from equity fund raising, debt and other resources.
This deal is expected to complete in 1Q 2021, subject to regulatory approval.
Inclusive of 1-5 THD, the REIT will own 96 properties worth $9.0 billion in Singapore, 37 properties worth $2.1 billion in Australia, 30 properties worth $2.1 billion in the US and 38 properties $0.8 billion in the UK.