SGX-listed AIMS APAC REIT on Wednesday announced plans to acquire Sime Darby Business Centre on the western fringe of Singapore’s urban core for S$102 million ($76.6 million) as part of a sale-leaseback deal.
Consisting of a five-storey light industrial building with a three-storey annex, the property at 315 Alexandra Road has BMW showrooms on the ground floor and business space in the floors above.
“The proposed acquisition marks a first for AA REIT in acquiring a light industrial asset in the city fringe area, where such assets are tightly held amongst owners and investors,” said Koh Wee Lih, chief executive of the REIT’s manager, an affiliate of Sydney-based AIMS Financial Group. “This will be a strategic fit for AA REIT, adding a centrally located and highly coveted light industrial building to the portfolio.”
The listed trust will be adding the property at 315 Alexandra Road to its portfolio of warehouses, business park and R&D assets at a time when investor interest in Singapore’s industrial sector continues to rise in the wake of the COVID-19 pandemic.
Achieving Immediate Returns
With a gross floor area (GFA) of 179,189 square feet (16,647 square metres), AA REIT’s purchase consideration for the 1960s-vintage building works out to S$569.23 per square foot.
The seller is Sime Darby, the Malaysian conglomerate and local distributor for BMW vehicles, whose 99-year leasehold on the site has 34 years remaining. The transaction would see anchor tenant Sime Darby Property Singapore Ltd lease back 70 percent of the GFA for 10 years, with a four-year renewal option, starting at S$5,720,880 for the first year.
The acquisition of Sime Darby Business Centre will provide immediate DPU accretion for AA REIT, Koh said, with distributions per unit rising 5.1 percent to 9.98 Singapore cents following the acquisition. Based on the purchase consideration, net property income yield accretive to the portfolio will be 6.2 percent.
“This transaction is testament to investors’ continued confidence in Singapore’s industrial sector,” said Rimon Ambarchi, head of industrial and logistics for Singapore and Southeast Asia at CBRE, which brokered the deal. “The fundamentals of Singapore’s industrial demand and reputation as a stable market make it highly attractive to investors in an otherwise volatile and uncertain market environment.”
The neighbourhood surrounding Sime Darby Business Centre is known locally for its many car dealerships. Other nearby businesses in the south-central precinct include IKEA, Mitsubishi Electric, the 442-room Park Hotel and Mapletree Business City, an integrated office, business park and retail campus-style development.
The property is 98 percent occupied and has nine sub-tenants from various industries, including IT, medical and consumer products. It recently underwent a refurbishment with upgrades to the entrance foyer, lift lobbies, toilets and common areas, according to AIMS.
Beefing Up the Portfolio
AA REIT’s most recent previous Singapore acquisition was announced last August, when it agreed to buy a four-storey warehouse in Jurong district for S$129.6 million in the city’s biggest industrial deal of 2020. The trust acquired the 733,991 square foot ramp-up logistics facility at 7 Bulim Street from private developer Titan Wenya for the equivalent of S$176.57 per square foot.
On Thursday, AA REIT announced total distributions to unitholders of S$14.5 million for the quarter ended 31 December 2020. DPU for the quarter was 2.05 Singapore cents, up 2.5 percent from the previous quarter, mainly due to the net contributions from 7 Bulim Street, the manager said.
The REIT’s existing portfolio consists of 28 properties, of which 26 are in Singapore, one is in Gold Coast in Australia’s Queensland state and the trust also has a 49 percent interest in a property near Sydney.