SINGAPORE (Jan 15): The manager of AIMS AMP Capital Industrial REIT (AA REIT) has agreed to sell the REIT’s smallest asset in its portfolio that is valued below $10 million, 10 Soon Lee Road, for a consideration of $8.17 million.

“As part of our proactive asset management strategy, we constantly review our portfolio for efficiencies and growth opportunities. A strategic review of the portfolio shows that the property is ready for divestment. This is in line with our capital recycling strategy and will give us enhanced financial flexibility, allowing us to further strengthen AA REIT’s balance sheet and capital structure,” says Koh Wee Lih, CEO of the manager.

Located within an industrial estate on the southern side of Soon Lee Road, the property has a net lettable area (NLA) of 7,224.2 sqm over a detached single-storey industrial building, as well as a four-storey industrial building with an ancillary office block.

It has a remaining land lease tenure of less than 24 years, and contributed to 0.8% of AA REIT’s annual gross rental income for FY17.

In a Monday announcement, AA REIT’s manager says the sale price represents an approximate 28% premium over the property’s latest valuation of $6.4 million, according to the valuation as at end-Sept 2017 appraised by CBRE.

It intends to use the net proceeds of the divestment to pare down existing debt to reduce aggregate leverage, and create additional debt headroom for future acquisitions, asset enhancement initiatives (AEIs), or development opportunities.

The sale is subject to approval by JTC Corporation, with the transaction expected to complete by the end of the current financial year (FY18).

Following the divestment, AA REIT’s portfolio will consist of 26 properties across Singapore and New South Wales (NSW), Australia.

Completion of the transaction will also bring the REIT’s portfolio occupancy rate to 89% on a pro forma basis from 88.8% as at end-Sept 2017 – while aggregate leverage will also decrease to 33.3% on a pro forma basis from 37.3% as at end-Sept, after factoring both the divestment and AA REIT’s recent $55 million private placement.

See: AA REIT says it raised $55 million via private placement

Units in AA REIT closed flat at $1.36 on Monday.