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Logistics property in Sydney to be acquired by Ascendas Reit for A$23.5 million

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Ascendas Reit will acquire a new logistics property in Sydney, Australia for A$23.5 million (S$21.1 million)

logistics propertyThe fund managers say that the acquisition of the logistics property is sound as despite the COVID-19 pandemic, Sydney continues to be the strongest industrial market in Australia underpinned by robust tenant demand and sustained levels of investor interest.

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 new logistics property to be developed on Lot 7, Kiora Crescent, Yennora, in Sydney, Australia (the Property) (the Acquisition), for A$23.5 million (S$21.1 million) (the Purchase Consideration). The Property will be developed by Larapinta Project Pty Ltd (the Vendor).

Mr William Tay, Executive Director and Chief Executive Officer of the Manager said, “Despite the COVID-19 pandemic, Sydney continues to be the strongest industrial market in Australia underpinned by robust tenant demand and sustained levels of investor interest. The acquisition of this new prime grade logistics property gives Ascendas Reit greater exposure to the Sydney market and also enhances the quality of our portfolio.”

Details of the Acquisition

Perpetual Corporate Trust Limited as trustee of Ascendas Longbeach Trust No. 10 (indirectly wholly-owned by Ascendas REIT Australia) (the Trustee) has entered into agreements with the Vendor for the purchase of the freehold land at Lot 7, Kiora Crescent, Yennora and the ensuing development of the logistics property.

The Acquisition of the land has been completed and the development of the logistics property is expected to complete in the second quarter of 2021.

The Purchase Consideration of A$23.5 million, which comprises the land and development cost, is 19.8% lower than the “as if complete” market valuation of the Property (A$29.3 million as at 30 June 2020).

Ascendas Reit is expected to incur an estimated total transaction cost of A$1.43 million (S$1.29 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$23.5 million, which amounts to approximately A$0.235 million (S$0.211 million)).

Net property income yield for the first year is approximately 6.2% and 5.8% pretransaction costs and post-transaction costs respectively. The Acquisition is expected to be accretive to Ascendas Reit’s Distribution per Unit.

The Acquisition will be funded through internal resources and/or existing debt facilities.

Benefits of the Acquisition

The Property is well located in the established inner-western Sydney industrial precinct of Yennora, an area that is enjoying renewed growth given its proximity to central western Sydney and the trend towards last mile logistics.

The area is well serviced by the Hume Highway to the south and M4 Motorway to the North that links the west, east and south west of Sydney. The Property is approximately 26 km west of the Sydney Central Business District and is surrounded by logistics and industrial properties.

The quality of Ascendas Reit’s Australian portfolio will be further boosted by this prime grade logistics warehouse located on freehold land (26,632 sq m). With an approximate lettable floor area of 13,100 sq m, it is designed to be functional and efficient for a wide range of users.

On 1 July 2020, Ascendas Reit acquired a new logistics property to be developed on Lot 7, Kiora Crescent, in Yennora, Inner-Western Sydney, Australia, for S$21.1 million (A$23.5 million). The development of this prime grade logistics property is expected to complete in 2Q 2021, improving the quality of Ascendas Reit’s portfolio and providing it with greater exposure to Sydney, which remains the strongest industrial market in Australia.

On 23rd July, Ascendas Reit reported that gross revenue for the six months ended 30 June 2020 (1H FY2020) rose by 14.6% y-o-y to S$521.2 million. The increase was mainly contributed by the United States (US) Portfolio of 28 business park properties and two Singapore business park properties, which were acquired in December 2019. This was partially offset by the rent relief support provided for the tenants to ease the challenges faced as a result of the COVID-19 pandemic, the divestment of Wisma Gulab in January 2020 and lower occupancies of certain properties. There was a total of S$10.3 million grant income recorded in 1H FY2020, which pertains to the property tax rebates received from IRAS as part of the government’s initiatives to help businesses adapt to the challenges caused by the COVID-19 pandemic.

Property operating expenses increased by 26.1% to S$133.2 million mainly due to the newly acquired US Portfolio. The Group also recorded S$10.3 million grant expenses in 1H FY2020, representing the property tax rebate passed on to all qualifying tenants in Singapore. Property tax expenses were lower in 1H 2019 due to the retrospective downward revisions in the annual value of certain properties. Therefore, 1H FY2020 net property income rose by 11.2% y-o-y to S$388.0 million.

Total amount available for distribution for 1H FY2020 rose 3.7% y-o-y to S$263.2 million.

DPU declined to 7.270 cents (-10.8% y-o-y), taking into consideration an enlarged number of applicable units (+16.3%) in issue due to the Rights Issue2 in December 2019 to fund acquisitions and to lower aggregate leverage, and the one-off distribution of rollover adjustments from prior years amounting to S$7.8 million in 1H 2019. Excluding the one-off distribution of rollover adjustments, DPU would have declined by 8% y-o-y.

Mr William Tay, Chief Executive Officer and Executive Director of the Manager, said: “In the first half of 2020, Ascendas Reit managed to deliver a steady distributable income despite the difficult operating environment, the provision of rent waivers to our tenants due to the COVID-19 pandemic and the absence of one-off distribution of rollover adjustments. With the enlarged number of Units in issue, DPU declined to 7.270 cents.

We continue to expect challenges in the months ahead which could impact the performance of Ascendas Reit. However, our well-diversified portfolio and tenant base should help us to mitigate the challenges ahead. We will continue to work closely with our tenants to ride out this uncertain period together.”

Written by Ravi Chandran


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