Ascendas REIT Buying Sydney Office Park for $218M

Ascendas REIT has added a fifth Australian office park asset to its portfolio, as the Singapore-listed trust bets on continued demand for suburban commercial assets in the wake of the COVID-19 pandemic.

Ascendas Funds Management, which manages the $9.7 billion trust, announced to the Singapore exchange on Friday that it has agreed to purchase 1-5 Thomas Holt Drive in Sydney’s Macquarie Park area from a fund managed by property investment firm AMP Capital for A$288.9 million.

“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),” said Ascendas REIT chief executive William Tay in a statement.

Tay and his team are sufficiently attracted to Macquarie Park, which ranks as Sydney’s largest office market outside of the central business district, that the REIT is making its second purchase in the area in less than three months, after purchasing a nearby building in Fraser Property’s Macquarie Exchange for A$167.2 million in September.

5.6% Yield in Sydney’s Suburbs

Ascendas REIT’s latest piece of Australia is a three-building complex covering a total of 39,188 square metres (421,816 square feet) which is held by AMP Capital’s Diversified Property Fund. The AMP vehicle was reported in early September as having put the asset on the market for around A$300 million.

The agreed purchase price for the property, which is fully leased, matches exactly with a valuation delivered on 1 December, according to Ascendas REIT’s statement to the exchange, with the trust paying the equivalent of just over A$7,372 per square metre for the freehold complex.

Once the deal closes, which is expected to take place during the first quarter of next year, Ascendas REIT’s manager projects that the trust can earn a first year yield of 5.6 percent on the complex, based on net property income after subtracting transaction costs.

Tenants at the complex currently include retail conglomerate Metcash and News Corp controlled-pay TV provider Foxtel. The weighted average lease expectancy for tenants is 4.5 years, with leases including annual rate increases of 3.25 to 3.75 percent per annum.

The three buildings in the complex, 1, 3 and 5 Thomas Holt Drive, were built in 1989 and 1990 before being refurbished five years ago. The development includes its own cafe, two tennis courts and a swimming pool, and two of the three blocks have received ratings of 5.0 out of 6 under Australia’s NABERS regime for sustainable buildings.

Singapore Revisits Macquarie Park

Among the virtues of the Thomas Holt Drive properties highlighted by the manager of Ascendas REIT is that they are within 100 metres of the Macquarie Park station on Sydney Metro’s Northwest Line, with the upcoming City Line expected to connect the area directly to downtown in 2024.

Ascendas REIT is well familiar with this particular region of Sydney as the Macquarie Exchange property which it acquired in September is only 250 metres away.

Also in the neighbourhood is Pinnacle Office Park, a 35,132 square metre office complex in Macquarie Park which Ascendas’ compatriots managing Keppel REIT acquired from Goodman Group for A$306 million, also in September.

Following the Thomas Holt Drive acquisition, 15 percent of Ascendas REIT’s assets will be located in Australia, further diversifying the trust’s assets away from its home base in Singapore.

In July the trust had agreed to pay A$23.5 million to pick up an industrial property project in Sydney’s Yennora area and in October of last year Ascendas REIT had signed up to buy a Melbourne office project from a joint venture between Frasers Property and ESR for A$111 million.