SINGAPORE (THE BUSINESS TIMES) - Aims Apac Reit is set to acquire Sime Darby Business Centre - a premium showroom and business-space precinct along Alexandra Road - for S$106.6 million.
The total cost comprises the purchase consideration of S$102 million and transaction costs of approximately S$4.6 million.
In a bourse filing on Wednesday evening, the Reit announced that its trustee, HSBC Institutional Trust Services (Singapore) Limited, had entered into a put and call option agreement to purchase the property from Aster (Alexandra) Pte. Ltd.
The property is anchored by Sime Darby Property Singapore Limited, a wholly-owned unit of Malaysian property developer Sime Darby Property Berhad.
It will be acquired on a partial leaseback arrangement, under which Sime Darby Property Singapore Limited will lease back 70 per cent of the building's total gross floor area (GFA) for a period of 10 years, with fixed annual rental escalation of 2.25 per cent, and a four-year lease-renewal option at the prevailing market rate.
The light industrial facility has a land area of 7,720 sq m, and a GFA of 16,647 sq m. The remaining land tenure was 34.2 years as at end-December.
Aims Apac Reit said this marks its first acquisition in a "city-fringe location", which has proximity and accessibility to the central business district.
The building is also leased to nine existing tenants from various industries, including IT, medical, consumer products, food and beverage (F&B) and business services, creating income diversity and stability.
Aims Apac Reit said the property will be acquired at an initial net property income (NPI) yield of 5.9 per cent, and is distribution per unit (DPU) accretive.
With the pro forma funding structure, the acquisition is expected to add 0.48 Singapore cents to the FY 2020 DPU of 9.5 Singapore cents to bring it to 9.98 Singapore cents on a pro forma basis.
Upon completion, the acquisition will lift Aims Apac Reit's light industrial exposure to 15.8 per cent from 11.7 per cent, and increase its portfolio occupancy to 95 per cent from 94.5 per cent. The weighted average lease expiry (WALE) of the Reit's portfolio will be extended to 4.52 years from 4.23 years.
The acquisition is proposed to be fully funded by debt, comprising a new term loan and existing debt facilities.
Aims Apac Reit's aggregate leverage will go up to 39 per cent following the acquisition, which remains within the MAS aggregate leverage limit requirement of 50 per cent.
Following the acquisition, the Reit will have a total of 29 properties, of which 27 are in Singapore, and two in Australia.
Mr Koh Wee Lih, chief executive of Aims Apac Reit's manager, said the property will be a "strategic fit" for the Reit, and reaffirms its growth strategy of seeking yield-accretive opportunities in the industrial and light industrial market, including logistics facilities and warehouses.
He added: "To strengthen our portfolio for the long-term, Aims Apac Reit will continue to explore new investment opportunities and focus on asset enhancement initiatives. This is aligned with our objectives of providing stable and regular distributions and achieving long-term capital growth for unitholders."
Units in Aims Apac Reit closed at S$1.29 on Wednesday, down 0.8 per cent or S$0.01.