Ascendas Reit continues to grow its Australian logistics portfolio with S$69.1 million acquisition
Singapore, 23 December 2020 – Ascendas Funds Management (S) Limited (the “Manager”), in its capacity as the Manager of Ascendas Real Estate Investment Trust (Ascendas Reit), is pleased to announce the proposed acquisition (the “Proposed Acquisition”) of a new logistics property, to be developed at 500 Green Road, Crestmead, in Brisbane, Australia (the “Property” or “500 Green Road”), for S$69.1 million1 (A$70.3 million)2 (“Acquisition Consideration”). The Property will be developed by Goodman Property Services (Aust) Pty Limited, a wholly-owned subsidiary of Goodman Limited (the Developer).
Mr William Tay, Executive Director and Chief Executive Officer of the Manager said, “This acquisition extends our logistics footprint in key distribution markets that will benefit from the robust domestic consumption and e-commerce demand in Australia. In addition, the new logistics development is expected to achieve a 5 Star Green Star rating on completion, further enhancing the overall quality of our Australian portfolio.”
Key Merits of 500 Green Road
The Property is well located in Crestmead, approximately 32 kilometres south of the Brisbane CBD. Crestmead is an established hub for interstate, intrastate and metropolitan distribution given its close proximity to key motorways such as the Logan, Gateway and Pacific Motorways that provide connections to key population areas on the eastern seaboard.
There has been a lack of new high-quality logistics stock coming to the Brisbane market and the vacancy rate in the south corridor remains low at 2.4% (source: CBRE).
Designed to be highly efficient, the Property will have a flexible design that offers warehouse sizes from 9,000 square metres to 38,000 square metres. Key features include high ceiling height of 12.2 metres (ridge), LED lighting and solar panels on the roof structure. The Property is targeting a 5 Star Green Star Design & As Built rating by the Green Building Council of Australia.
The flexible design of the Property will allow Ascendas Reit to capture a wide spectrum of market demand which is underpinned by the large domestic consumption and growing e-commerce sector. In the 12 months to September 2020, around 12.0% of Australia’s total retail trade estimate was spent on online retail, which is about 38.7% higher than the 12 months to September 20193.
500 Green Road will be Ascendas Reit’s tenth logistics property in Brisbane. Total net lettable area of the logistics portfolio in Brisbane is expected to increase by approximately 21% to 220,532 sqm.
Details of the Proposed Acquisition
The Acquisition Consideration of S$69.1 million (A$70.3 million), which comprises the land and development cost, is in line with the “as if complete” market valuation of the Property at S$69.1 million (A$70.3 million)4.
Ascendas Reit is expected to incur an estimated transaction cost of S$1.4 million (A$1.4 million) which includes stamp duty, professional advisory fees, and acquisition fees payable to the Manager in cash (being 1% of the Acquisition Consideration, which amounts to approximately S$0.691 million (A$0.703 million)).
Net property income (NPI) yield for the first year is approximately 5.6% and 5.4%5 pre-transaction costs and post-transaction costs respectively. The annualised pro forma impact on FY2019 distribution per Unit (DPU) would be an estimated improvement of 0.014 Singapore cents assuming the Proposed Acquisition was acquired and completed on 1 April 20196.
For the purpose of the Proposed Acquisition, Ascendas Longbeach Trust No. 12, an indirectly wholly-owned Australian trust of Ascendas REIT Australia, was established.
The Trust Company (Australia) Limited as trustee of Ascendas Longbeach Trust No. 12 has entered into a land sale agreement with the custodian for GAI2 Crestmead Trust, the trustee of which is Goodman Funds Management Australia Limited, for the acquisition of the freehold land at 500 Green Road, and a development management agreement with the Developer for the ensuing development of the Property.
The acquisition of the land has been completed today and the development of the Property is estimated to complete in 4Q 2021. The Developer will provide a 2.5-year rental guarantee from the completion of the Property for any vacant space.
The Proposed Acquisition will be funded by Ascendas Reit through internal resources and/or existing debt facilities.
Notes
1 An illustrative exchange rate of A$1.000: S$0.983 is used for all conversions from Australian Dollar amounts into Singapore Dollar amounts in this press release.
2 Includes land and development cost and 2.5-year rental guarantee provided by the Developer, for the vacant space in 500 Green Road from practical completion of the Property.
3 Source: National Australia Bank Limited: NAB Online Retail Sales Index September 2020.
4 The valuation (as at 10 December 2020) was commissioned by the Manager and Perpetual Corporate Trust Limited (in its capacity as trustee of Ascendas REIT Australia) and was carried out by Jones Lang LaSalle Advisory Services Pty Limited using the capitalisation and discounted cash flow methods.
5 The NPI yield is derived using the estimated NPI, including rental guarantee for the vacant space provided by the Developer, in the first year of acquisition.
6 The annualised pro forma DPU impact on FY2019 DPU is calculated based on the following assumptions a) Ascendas Reit had acquired the completed Property on 1 April 2019, held and operated the completed Property from 1 April 2019 to 31 December 2019, b) the Proposed Acquisition was funded based on a funding structure of 40% debt and 60% equity, and c) the Manager elects to receive its base fee 80% in cash and 20% in units.