Ascendas Reit acquires its fourth suburban office in Australia for A$110.9 million
Singapore, 3 October 2019 – Ascendas Funds Management (S) Limited (the “Manager”), the Manager of Ascendas Real Estate Investment Trust (“Ascendas Reit”), is pleased to announce the acquisition of a suburban office building, to be constructed at 254 Wellington Road, in Melbourne, Australia (the “Property”), for A$110.9 million1 (S$104.4 million2) (the “Purchase Consideration”) from ESR FPA (Wellington Road) Pty Limited (the “Vendor”).
Mr William Tay, Executive Director and Chief Executive Officer of the Manager said, “This will be our fourth suburban office property in Australia. We are very pleased with this acquisition as it is well-located in the Monash Technology Precinct in Melbourne, has 65% of the space pre-committed for 10 years and is DPU accretive.”
Details of the Acquisition
The Trust Company (Australia) Limited, as trustee of Ascendas Business Park Trust No. 2 (indirectly wholly-owned by Ascendas Reit), has today entered into an agreement with the Vendor for the purchase of the freehold land and the subsequent development of the suburban office building at 254 Wellington Road.
The Purchase Consideration of A$110.9 million, which comprises the land and development cost, is in line with the “as if complete” market valuation of the Property (A$110.9 million as at 1 August 20193).
Ascendas Reit is expected to incur an estimated total transaction cost of A$1.3 million (S$1.2 million) which includes stamp duty, professional advisory fees, and acquisition fees payable to the Manager in cash (being 1% of the Purchase Consideration of A$110.9 million, which amounts to approximately A$1.109 million (S$1.044 million)).
The Property is expected to receive practical completion in 2Q 2020, upon which automotive company, Nissan Motor Co. (Australia) Pty Ltd, will commence a 10-year lease for 65.2% of the space. This lease has a built-in rent escalation of 3.0% per annum. The Vendor will continue to market the remaining space in the Property. From practical completion of the Property, the Vendor will provide a three-year rental guarantee for any remaining vacant space.
Net property income yield4 for the first year is approximately 5.8% and 5.7% pre-transaction costs and post-transaction costs respectively. The annualised pro forma financial effect of the acquisition on FY18/19 distribution per Unit would be an improvement of 0.014 Singapore cents5. The acquisition will be funded through internal resources and/or existing debt facilities.
Including the Property, Ascendas Reit will own 97 properties in Singapore, 36 properties in Australia and 38 properties in the United Kingdom. The Australian portfolio’s pro forma weighted average lease term to expiry is expected to improve to 4.5 years from 4.3 years as at 30 June 2019.
About The Property
254 Wellington Road is a new, state-of-the-art suburban office building comprising an 8-level corporate office, workshop, café, end-of-trip facilities and multi-level car parking for 911 vehicles. The Property has a net lettable area of 17,507 sqm and sits on freehold land. It is expected to achieve 5 Star NABERS Energy Rating and 5 Star Green Star Design.
It is well-located within Melbourne’s desirable south eastern suburb of Mulgrave, situated on the southern side of Wellington Road and within proximity of greater Melbourne. Mulgrave is 21 kilometres south east of the Melbourne Central Business District.
Notes:
1 Includes incentives to be reimbursed by the Vendor.
2 All conversions from Australian Dollar amounts into Singapore Dollar amounts in this press release are based on the 30 September 2019 exchange rate of A$1.00000: S$0.94121.
3 The valuation was commissioned by the Manager and The Trust Company (Australia) Limited (in its capacity as trustee of Ascendas Business Park Trust No. 2) and was carried out by Urbis Valuations Pty Ltd using the capitalisation and discounted cash flow methods.
4 The net property income (NPI) yield is derived from the estimated NPI expected in the first year of acquisition (includes incentives for the first year to be reimbursed by the Vendor and one year of rental guarantee provided by the Vendor for the vacant space).
5 The annualised pro forma DPU for FY18/19 is calculated based on following assumptions 1) Ascendas Reit had completed the acquisition on 1 April 2018, held and operated the property for the whole of the financial year ended 31 March 2019, 2) the acquisition was funded based on a funding structure of 40% debt and 60% equity, 3) the Manager elects to receive its base fee 80% in cash and 20% in units.