ESR-Reit is acquiring a warehouse in Jurong for $225 million and is revamping two existing assets, it announced yesterday.
It added that it will raise up to $150 million to finance these undertakings and repay existing debt.
The manager of the mainboard-listed real estate investment trust (Reit) told the Singapore Exchange that the warehouse deal will be made through PTC Logistics Hub, a limited liability partnership (LLP) here.
ESR-Reit holds 49 per cent of the entity, while third-party logistics firm Poh Tiong Choon Logistics (PTCL) holds the rest.
The LLP has entered into a put-and-call-option agreement with PTCL to acquire the leasehold interest in the warehouse at 48 Pandan Road, within the Jurong Industrial Estate.
The LLP will take out debt of $146.2 million to fund the deal, while PTCL will contribute $40.2 million by transferring its interest in the property. ESR-Reit's trustee will contribute $38.6 million in cash or a mixture of cash and units in ESR-Reit.
ESR-Reit's total acquisition costs will be $44.4 million.
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150m
ESR-Reit will raise up to this amount in Singapore dollars to finance its latest undertakings, as well as to repay existing debt.
Once the deal is completed, the property will be leased back to PTCL as tenant for 10 years with a fixed annual rent rise.
The newly redeveloped six-storey ramp-up warehouse has rooftop parking and a gross floor area of around 1.1 million sq ft. It has an existing lease term with a further term of 24 years and four months starting from July 1.
ESR-Reit's rental income from the logistics portfolio will rise from 19.7 per cent as of April 24, to 22.3 per cent after the acquisition.
Separately, ESR-Reit also plans to revamp two existing assets.
These involve using untapped plot ratio to develop an eight-storey industrial building on the site of 7000 Ang Mo Kio Avenue 5, and to smarten up UE BizHub East in Changi Business Park.
The projects will cost $45.7 million and are expected to provide an estimated yield on cost of up to 9 per cent.
Construction will start in the fourth quarter for both properties, and will take 18 to 24 months to complete for the Ang Mo Kio site and 12 months for UE BizHub East.
ESR-Reit's manager said it is in "advanced negotiations" with prospective tenants for the new building.
ESR-Reit holds 80 per cent of the Ang Mo Kio site with the rest owned by Ho Lee Properties.
The work at UE BizHub East will involve redesigning the drop-off area to improve traffic flow while access to the office lobbies will be improved. The facade and internal food street will also get a facelift.
ESR-Reit proposed an equity fund raising yesterday to fund the various ventures.
New units will be offered via a private placement to raise gross proceeds of up to $100 million as well as a preferential offering to unit holders to raise up to $75 million.
Under the private placement, about 195 million new units will be placed to institutional and other investors at an issue price of between 51.5 cents and 52.5 cents apiece. This will raise about $75 million in gross proceeds, with an upsize option to increase it to $100 million.
The issue price range for the placement represents a discount of 6.5 to 8.3 per cent to the volume-weighted average price of 56.15 cents per unit on June 14.
ESR-Reit requested a trading halt at 7.55am yesterday before it filed these announcements.
