Ascendas Reit expands footprint in Sydney’s Macquarie Park with S$284.0 million acquisition
Singapore, 11 December 2020 – Ascendas Funds Management (S) Limited (the Manager), the Manager of Ascendas Real Estate Investment Trust (Ascendas Reit), is pleased to announce the proposed acquisition of a suburban office property, located at 1 – 5 Thomas Holt Drive, Macquarie Park, in Sydney, Australia (1-5 THD), for S$284.0 million1 (A$288.9 million)2 (Purchase Consideration) (Proposed Acquisition) from AMP Capital (Vendor).
Mr William Tay, Executive Director and Chief Executive Officer of the Manager said, “We are continuing to expand our suburban office portfolio in Australia as affordable satellite hubs such as Macquarie Park remain attractive for companies seeking to decentralise from the central business district (CBD). 1-5 Thomas Holt Drive is our fifth suburban office property investment in Australia. With this acquisition, Sydney accounts for 48% of our Australian portfolio.”
Key Merits of the Proposed Acquisition
1. Well located in Macquarie Park with excellent connectivity via rail and road
1-5 THD is located in Macquarie Park, the largest metropolitan market in Australia and a well-established business precinct occupied by national and international corporate headquarters across the pharmaceutical, technology, electronics and telecommunications industries.
The property is located 250 metres from MQX4, another suburban office property (currently under development) that Ascendas Reit is acquiring3.
1-5 THD is located just 100 metres away from the Macquarie Park Metro station. With the opening of the Sydney Metro City Line in 2024, travel time to the CBD will be further reduced to 20 minutes4. The property is also 750 metres away from the arterial M2 motorway.
2. Comprises three good quality adjacent office blocks on freehold land
The modern campus style property comprises three suburban office blocks with a net lettable area (NLA) of 39,188 square metres, located on freehold land.
1-5 THD has one of the highest car parking ratios of 1 space per 35 square metres of NLA (total of 1,107 spaces) for a suburban office property within Macquarie Park.
The office blocks underwent substantial refurbishments between 2015 to 2016. Two of the office blocks, 1 and 3 Thomas Holt Drive, have each achieved a 5.0 Star NABERS energy rating. The on-site amenities include a café, two tennis courts, a swimming pool and barbeque areas.
3. High occupancy rate underpinned by strong tenant base
1-5 THD is 100% occupied5 (93% physical occupancy rate) with a long weighted average lease to expiry (WALE) of 4.5 years6. This will lengthen the Australian portfolio’s WALE from 4.3 years to 4.4 years7.
The leases are double net and have built in annual rental escalations of 3.25% to 3.75% providing stable organic growth for Ascendas Reit.
The key tenants, amongst others, are Australian companies Metcash and Foxtel. Metcash is Australia’s leading wholesale distribution and marketing company with sales of over A$13 billion in FY2020. Foxtel is an innovative and dynamic media company owned by Nasdaq-listed media company News Corporation Ltd (65%) and ASX listed telecommunications company Telstra Corporation Ltd (35%). These tenants will strengthen and diversify Ascendas Reit’s Australian customer base.
Details of the Proposed Acquisition
For the purpose of this Proposed Acquisition, Ascendas Business Park Trust No. 4, an indirectly wholly-owned Australian Trust of Ascendas REIT Australia, was established. The Trust Company (Australia) Limited, as trustee of Business Park Trust No. 4, has today entered into a sale and purchase agreement with the Vendor for the purchase of 1-5 THD.
The Purchase Consideration of A$288.9 million, is in line with the independent market valuation of A$288.9 million as at 1 December 20208.
Ascendas Reit is expected to incur an estimated total transaction cost of S$19.3 million (A$19.6 million) which includes stamp duty, professional advisory fees, and acquisition fees payable to the Manager in cash (being 1% of the purchase consideration of S$284.0 million (A$288.9 million), which amounts to approximately S$2.840 million (A$2.889 million)).
Net property income (NPI) yield9 for the first year is approximately 5.9% and 5.6% pre-transaction costs and post-transaction costs respectively.
The annualised pro forma impact on FY2019 distribution per Unit (DPU) is expected to be an improvement of 0.059 Singapore cents10 assuming the Proposed Acquisition was completed on 1 April 2019.
The Proposed Acquisition will be funded by Ascendas Reit with proceeds from the Equity Fund Raising11, debt facilities and/or internal resources.
Subject to the approval from the Australian Foreign Investment Review Board, the completion of the Proposed Acquisition is expected to be in 1Q 2021. Taking into account 1-5 THD, Ascendas Reit will own 96 properties (S$9.0 billion) in Singapore, 37 properties (S$2.1 billion) in Australia, 30 properties (S$2.1 billion) in the United States and 38 properties (S$0.8 billion) in the United Kingdom.
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 two-year rental guarantee, provided by the Vendor, for current vacant space in 1-5 THD.
3 Please refer to the press release “Ascendas Reit to acquire a suburban office in Sydney’s Macquarie Park for A$167.2 million” dated 18 September 2020.
4 More information on the Sydney Metro Line: https://www.sydneymetro.info/citysouthwest/project-overview
5 Takes into account the two-year rental guarantee provided by the Vendor for vacant space.
6 By rental income.
7 On a pro forma basis assuming the Proposed Acquisition was completed on 30 September 2020.
8 The valuation 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.
9 The NPI yield is derived from the estimated NPI expected in the first year of acquisition (including the rental guarantee provided by the Vendor for the vacant space).
10 The annualised pro forma DPU impact on FY2019 DPU is calculated based on the following assumptions (a) Ascendas Reit had completed the Proposed Acquisition on 1 April 2019, held and operated 1-5 THD from 1 April 2019 to 31 December 2019, (b) the Proposed Acquisition is 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.
11 Please refer to the “Launch of Equity Fund Raising to Raise Gross Proceeds of Approximately S$1,200 million” announcement dated 10 November 2020.