Ascendas Reit to acquire Philips APAC Center in Singapore for S$104.8 million
4 August 2022, Singapore – Ascendas Funds Management (S) Limited, as the manager (the “Manager”) of Ascendas Real Estate Investment Trust (“Ascendas Reit”), is pleased to announce Ascendas Reit’s proposed acquisition of Philips APAC Center located at 622 Lorong 1 Toa Payoh, Singapore (“APAC Center” or the “Property”) from Philips Electronics Singapore Pte Ltd (the “Vendor”) (the “Proposed Acquisition”) which will leaseback their existing space to become the anchor tenant. The purchase consideration for the Proposed Acquisition is S$104.8 million (the “Purchase Consideration”).
Mr William Tay, Executive Director and Chief Executive Officer of the Manager said, “Singapore remains a key market for Ascendas Reit, making up approximately 60% of total assets under management. The acquisition of APAC Center is a natural addition to the portfolio, strengthening our technology and biomedical customer base and improving the overall resilience of the portfolio with its high occupancy of 95.7% and long WALE of 4.5 years.”
Key Merits of the Proposed Acquisition
1. Aligned with Ascendas Reit’s strategic focus
In line with the growing digital economy and the increasing importance of life sciences and biomedical research and development, Ascendas Reit’s strategy is to continue investing in properties that support the requirements of related businesses.
In 2016, the Property was redeveloped into a high-tech campus for Philips’ ASEAN Pacific (“APAC”) headquarters and innovation centre. The six-storey building comprises laboratory, research and development, warehouse and ancillary office space over a gross floor area of 37,975 square metres.
The Proposed Acquisition is well aligned with Ascendas Reit’s strategic intention and will strengthen both its portfolio and customer base. In addition, the Manager is targeting to attain a BCA Green Mark GoldPlus certification for the Property after the completion of the Proposed Acquisition.
2. Centrally located high-tech campus
The Property is well accessible and centrally located within Toa Payoh town, which is a 15 minutes’ drive to Singapore’s central business district. It is in close proximity to the pan-island and central expressways and is a 3-minute walk to the Caldecott MRT station.
3. High occupancy rate with long weighted average lease to expiry (“WALE”)
Upon completion of the Proposed Acquisition, the Vendor, Philips, a leading health technology company listed in Amsterdam and New York, will enter a multi-year leaseback of more than two-thirds of the Property’s gross floor area. The Property serves as its APAC headquarters with a focus on its healthcare and technology business.
As at 30 June 2022, the Property is leased to a total of four tenants, has an occupancy rate of 95.7% and a long WALE of 4.5 years.
4. Distribution per Unit (“DPU”) accretive acquisition
The first year net property income (“NPI”) yield1 of the Proposed Acquisition is approximately 7.2% and 6.8% pre-transaction costs and post-transaction costs respectively.
The Proposed Acquisition will be funded by Ascendas Reit through internal resources and/or existing debt facilities. The pro forma impact on the DPU for the financial year commencing on 1 January 2021 and ended 31 December 2021 is expected to be an improvement of 0.045 Singapore cents (0.29% DPU accretion) assuming the Proposed Acquisition was completed on 1 January 20212.
The Proposed Acquisition is expected to complete in the second half of 2022.
Details of the Proposed Acquisition
HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of Ascendas Reit (the “Trustee”), has entered into a Call and Put Option Agreement with the Vendor today, to acquire the Property.
The Purchase Consideration of S$104.8 million was negotiated on a willing-buyer and willing-seller basis. The independent market valuation of the Property as of 31 May 2022 is S$111.5 million3.
The total cost of the Proposed Acquisition is estimated to be approximately S$110.04 million comprising (i) the Purchase Consideration of S$104.8 million, (ii) the acquisition fee payable to the Manager of approximately S$1.048 million (being 1% of the Purchase Consideration), and (iii) stamp duty, professional and other fees and expenses of S$4.192 million.
Upon completion of the Proposed Acquisition, Ascendas Reit will own 229 properties comprising 96 properties in Singapore, 36 properties in Australia, 48 properties in the United States and 49 properties in the United Kingdom/Europe.
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1 The NPI yield is derived using the estimated NPI expected in the first year of acquisition.
2 The pro forma DPU impact is calculated based on the following assumptions a) Ascendas Reit had completed the Proposed Acquisition on 1 January 2021, held and operated the Property from 1 January 2021 to 31 December 2021, b) the Proposed Acquisition is funded 100% by debt, and c) the Manager elects to receive its base fee 80% in cash and 20% in units.
3 The valuation (dated 31 May 2022) was commissioned by the Manager and HSBC Institutional Services (Singapore) Limited (as trustee of Ascendas Reit) and carried out by Jones Lang LaSalle Property Consultants Pte Ltd using the sales comparison and income capitalisation approaches.