Ascendas Reit to buy remaining 75% stake in Galaxis for $534 million

Galaxis, a business park at one-north.
Galaxis, a business park at one-north.PHOTO: ASCENDAS REIT

SINGAPORE (THE BUSINESS TIMES) - Ascendas Reit is buying the remaining 75 per cent equity stake in Galaxis, a business park at one-north for about $534.4 million.

Including the acquisition fee of about $5.4 million, stamp duty, professional and other fees and expenses of $4 million, the total purchase cost is about $543.8 million.

Its net property income yield for the first year is about 5.3 per cent post transaction costs. The pro forma impact on the distribution per unit (DPU) for FY20 is also expected to be an improvement of 0.059 cent or 0.4 per cent.

The agreed property value of the property on a 100-per-cent basis is about $720 million, which is about 2 per cent lower than the average of two independent market valuations of $735 million as at April 30, 2021.

The acquisition fee will be paid in the form of new units, which cannot be sold within one year from the date of issuance.

The manager intends to finance the total acquisition cost (less the acquisition fee) through a mix of debt financing and issue of consideration units to the vendor, Ascendas Fusion 5 Holding, of up to $83 million, as well as proceeds of an equity fund raising. The proportion of debt and equity financing will be decided later.

The acquisition and proposed issuance of consideration units will be subject to unitholders' approval at an extraordinary general meeting.

As at end-March 2021, Galaxis has an occupancy rate of 98.6 per cent. Completed in 2015, the property is zoned for business park usage with a 30 per cent white component (higher than the typical 15 per cent white component) allowing for higher flexibility in the use of space such as having more office and retail space within the development.

Some 73 per cent is currently business park space, with 17 per cent of office space, 7 per cent of retail and F&B space, and 3 per cent work lofts.

Tenants include Sea (formerly Garena), Canon and Oracle. Higher rentals are expected from information and communications technologies and electronics customers, it said.

The full ownership of Galaxis will enlarge the Reit's business and science park portfolio in Singapore by 18 per cent to $4.9 billion and increase the number of properties it has in the one-north business park to five, including Grab's headquarters which is under development and expected to complete this year. It will also give the manager better operational and tax efficiency.

The property has a remaining land lease tenure of about 51 years, which is rare given JTC's current practice of releasing shorter tenure land plots of between 20 and 30 years under the industrial government land sales programme, the Reit manager said.

Units of the Reit on Tuesday added $0.02 or 0.65 per cent to $3.12.