Ascendas REIT Buys Sydney Office Project From Frasers JV for A$167.2M

Singapore’s Ascendas REIT is picking up an office project in suburban Sydney, marking the second acquisition by an SGX-listed trust in the Macquarie Park area in less than a week.

The REIT managed by Singapore’s CapitaLand has agreed to purchase one of four buildings being developed in Macquarie Exchange, a business park joint venture between Frasers Property and Winten Property Group, for A$167.2 million ($121.9 million), according to an announcement to the Singapore exchange on Friday.

“We are delighted to secure our first suburban office property in Macquarie Park, Sydney’s premier innovation location, and Ascendas REIT’s fifth suburban office asset in Australia,” said William Tay, executive director and CEO of the manager of Ascendas REIT.

The deal to purchase the unfinished project near northwest Sydney’s Macquarie University was announced just six days after competing Singapore trust Keppel REIT revealed its own deal to buy a completed office park asset just one block away.

Suburbs Come Back in Style

In its latest acquisition, which comes at an initial net property income yield of 6.1 percent, the manager of Ascendas REIT is making a bet on the prospects for Macquarie Park, one of the city’s strongest secondary office markets, which echoes the ideas of its rivals at Keppel REIT.

“We believe that decentralisation trends will continue to benefit Macquarie Park which has already attracted many leading companies who have set up their headquarters in the precinct,” Tay said in explaining his firm’s decision to add the asset to the trust’s $9.38 billion portfolio.

Ascendas REIT’s compatriots at Keppel REIT, in explaining their decision to spend A$306 million to pick up the three-building Pinnacle Office Park on 13 September, had pointed to Macquarie Park’s status as the second-largest office market in New South Wales, following Sydney proper, while also highlighting the city’s improving infrastructure.

Ascendas REIT’s manager also noted transportation advantages in the area, with Sydney Metro’s City Line set to connect Macquarie Park with North Sydney and the New South Wales capital’s central business district when it is completed in 2024.

The deal is Ascendas REIT’s fifth suburban office acquisition in Australia, and when completed will bring the trust’s assets Down Under to 14 percent of its total holdings – up from 13 percent currently.

Buying Off the Plan

Ascendas REIT will be paying the equivalent of A$8,626 per square metre of net leasable area in the property at 1 Giffnock Avenue, which is set to cover some 19,384 square metres (208,648 square feet) when it is completed in mid-2022.

Under the terms of the agreement, Ascendas REIT’s purchase price is adjustable upward or downward depending on exchange rates and other factors, with the trust set to fund construction costs. Frasers and Wintek won approval to start digging for Macquarie Exchange, a four-building, 83,368 square metre project in January of this year.

As part of the deal, the developers are providing rental guarantees which will provide payment to Ascendas REIT for any unoccupied space in the project for its first three years following completion.

The nine-storey building includes 17,753 square metres of office space, with another 1,631 square metres of retail on the ground floor. The project is 100 metres from the Macquarie Park Metro station, and is designed to achieve a 6 Star rating on Australia’s Green Star scale for sustainable buildings and a 5.5 mark on the country’s NABERS standard for energy efficiency.

Ascendas REIT expects to fund the acquisition through internal resources, existing debt facilities, or a combination of the two. The deal is the trust’s second acquisition in Sydney in less than three months, after it picked up a logistics property in the city for A$23.5 million in early July.