The manager of CapitaLand Integrated Commercial Trust (CICT), on Dec 3, says it has acquired two Grade A office buildings in Sydney, Australia for a purchase consideration of A$330.7 million ($330.7 million).
The trust had entered into a unit sale agreement with CLA Real Estate Holdings Pte. Ltd. to acquire the units in two trusts that hold 66 Goulburn Street and 100 Arthur Street, two Grade A office buildings in Sydney’s central business districts (CBD).
The acquisitions mark CICT’s first inroad into Australia, its second overseas developed market after Germany.
The total consideration is based on the adjusted net asset value (NAV) of the trusts, taking into account the aggregate agreed property value of A$672.0 million, other adjustments and other assets, and less the total amount of liabilities of the two trusts.
CICT’s total acquisition outlay will come in at around A$381.0 million, subject to completion adjustments.
The acquisition is said to be accretive to CICT’s distribution per unit (DPU) by 3.1% (or 10.54 cents) on a pro forma annualised 1HFY2021 DPU basis.
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CICT’s pro forma NAV per unit would be lifted by 2.6% to $2.07.
66 Goulburn Street, in Sydney’s CBD, is a 24-storey Grade A office building with ancillary retail space and a basement car park.
100 Arthur Street, a 23-storey Grade A office with ancillary retail space, is located in North Sydney’s CBD. The building underwent a major refurbishment from 2019 to 2021 at a total cost of A$17 million.
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Photo of 100 Arthur Street: CICT
Both properties have easy access to public transportation and amenities.
They have also achieved sustainability ratings under the National Australian Built Environment Rating System (NABERS).
Teo Swee Lian, the chairman of the manager, says the acquisition is an “opportune time for CICT to enter Australia” despite the evolving Covid-19 situation.
This is “[the country’s] attractive office market underpinned by healthy economic fundamentals in the medium to long term, and expected recovery as the country emerges from Covid-19 restrictions,” she says.
“In particular, Sydney is witnessing major development and rejuvenation initiatives in line with its government-backed ambition to become a leading innovation and technology hub in the region. The acquisition will allow CICT to gain a foothold in Australia, one of Asia Pacific’s largest developed markets, and open CICT to more opportunities to drive growth,” she adds.
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“We are also pleased to be investing in Sydney, which is striving to become a climate leader under its Sustainable Sydney 2030 community plan. The addition of the NABERS-rated properties complements CICT’s 100% green rated portfolio and supports the trust’s sustainability commitment.”
Tony Tan, CEO of the manager says the acquisition is part of CICT’s “continual efforts to reconstitute and optimise CICT’s portfolio for sustainable returns and growth”.
“It enables the recycling of capital from the divestment of our 50.0% interest in One George Street, at an exit yield of 3.17% per annum, into two higher-yielding office assets in Australia, at a combined implied net property income yield of 5.2% per annum,” he says.
“The two assets are complementary to CICT’s portfolio, and will enhance our portfolio resilience with further geographical and income diversification. Riding on the post-lockdown recovery of Australia’s economy, we expect to ramp up occupancy and drive rental growth of the two assets through proactive lease management,” he adds.
Both acquisitions will increase CICT’s overall property value by around 3% to $22.4 billion upon completion. The trust’s overseas portfolio exposure will increase to 7% from 4% before.
“This is in line with our strategy to remain predominantly focused in Singapore, with up to 20% of portfolio property value in overseas developed markets. We will continue to leverage our sponsor’s overseas investment and asset management platform and network to build scale in the developed markets where CICT has established footprint. At the same time, we will continue to pursue organic growth and inorganic opportunities from our sponsor and third parties in Singapore,” says Tan.
The acquisitions are expected to be completed in the first quarter of 2022.
The acquisitions will be funded with Australian-dollar-denominated bank loans to achieve natural hedging.
The net distributions from the two trusts holding the assets are also expected to be hedged. Post-acquisition, CICT’s pro forma aggregate leverage is expected to be approximately 41%.
Units in CICT closed at $2.07 on Dec 2.
Cover picture of 66 Goulburn Street: CICT