AIMS Apac Reit (AA Reit) reported a distribution per unit (DPU) of 2.05 Singapore cents for the third quarter ended Dec 31, 2020, down 18 per cent from its Q3 DPU of 2.5 cents a year ago.

 

In a pre-market bourse filing on Thursday, its manager said the lower distribution was mainly due to management fees paid fully in cash for the quarter, as well as having an amount reserved for distribution to perpetual securities holders.

 

Gross revenue for Q3 grew 9.1 per cent to S$32.1 million from S$29.5 million in the previous year. The increased revenue was attributed to contributions from AA Reit' s recently acquired property at 7 Bulim Street, as well as higher rental and recoveries at the properties at 3 Tuas Avenue 2 and 20 Gul Way.

 

These were however partially offset by lower contributions from the property at 1A International Business Park arising from the conversion from master lease to multi-tenancy leases, the expiry of the master lease at 541 Yishun Industrial Park A, and lower rental and recoveries from the property at 103 Defu Lane 10, said the real estate investment trust' s (Reit) manager.

 

Net property income for the quarter under review stood at S$23.6 million, up 2 per cent from S$23.1 in the previous year. This resulted from the higher gross revenue being offset by increased year-on-year property operating expenses in the absence of a property tax refund recognised a year ago.

 

As such, Q3 distributions to unitholders dropped 17.6 per cent on year to S$14.5 million from S$17.6 million previously.

 

The distribution will be paid out on March 19 after the record date on Feb 5.

 

The Reit' s DPU stood at 6.05 cents for the nine months ended Dec 31, 2020, representing a 19.3 per cent decline from its DPU of 7.5 cents for the same period a year ago.

 

AA Reit' s aggregate leverage was 34.1 per cent as at end-2020. The Reit manager noted cash balances of about S$14.8 million, and undrawn committed facilities of S$139.5 million.

 

Looking ahead, AA Reit' s manager expects the industrial outlook for Singapore and Australia to be supported by shifts in consumer behaviour towards e-commerce, along with increased business activities in the advanced manufacturing and information and communications technology industries.

 

" The Reit has continued to maintain a stable performance, underpinned by the portfolio' s diversity in tenant and asset mix, with over 50 per cent in the resilient logistics and warehouse sector," commented Koh Wee Lih, chief executive of the manager.

 

" We are pleased to note that the Reit' s focus on proactive leasing efforts has translated into the completion of 21 leasing deals during the quarter, with above-industry portfolio occupancy rate at 95.7 per cent."

AIMS Apac Reit is set to acquire Sime Darby Business Centre - a premium showroom and business-space precinct along Alexandra Road - for S$106.6 million.

 

The total cost comprises the purchase consideration of S$102 million and transaction costs of approximately S$4.6 million.

 

In a bourse filing on Wednesday evening, the Reit announced that its trustee, HSBC Institutional Trust Services (Singapore) Limited, had entered into a put and call option agreement to purchase the property from Aster (Alexandra) Pte. Ltd.

 

The property is anchored by Sime Darby Property Singapore Limited, a wholly-owned unit of Malaysian property developer Sime Darby Property Berhad.

 

It will be acquired on a partial leaseback arrangement, under which Sime Darby Property Singapore Limited will lease back 70 per cent of the building' s total gross floor area (GFA) for a period of 10 years, with fixed annual rental escalation of 2.25 per cent, and a four-year lease-renewal option at the prevailing market rate.

 

The light industrial facility has a land area of 7,720 sq m, and a GFA of 16,647 sq m. The remaining land tenure was 34.2 years as at end-December.

 

Aims Apac Reit said this marks its first acquisition in a " city-fringe location" , which has proximity and accessibility to the central business district.

 

The building is also leased to nine existing tenants from various industries, including IT, medical, consumer products, food and beverage (F& B) and business services, creating income diversity and stability.

 

Aims Apac Reit said the property will be acquired at an initial net property income (NPI) yield of 5.9 per cent, and is distribution per unit (DPU) accretive.

 

With the pro forma funding structure, the acquisition is expected to add 0.48 Singapore cents to the FY 2020 DPU of 9.5 Singapore cents to bring it to 9.98 Singapore cents on a pro forma basis.

 

Upon completion, the acquisition will lift Aims Apac Reit' s light industrial exposure to 15.8 per cent from 11.7 per cent, and increase its portfolio occupancy to 95 per cent from 94.5 per cent. The weighted average lease expiry (WALE) of the Reit' s portfolio will be extended to 4.52 years from 4.23 years.

 

The acquisition is proposed to be fully funded by debt, comprising a new term loan and existing debt facilities.

 

Aims Apac Reit' s aggregate leverage will go up to 39 per cent following the acquisition, which remains within the MAS aggregate leverage limit requirement of 50 per cent.

 

Following the acquisition, the Reit will have a total of 29 properties, of which 27 are in Singapore, and two in Australia.

 

Koh Wee Lih, chief executive of Aims Apac Reit' s manager, said the property will be a " strategic fit" for the Reit, and reaffirms its growth strategy of seeking yield-accretive opportunities in the industrial and light industrial market, including logistics facilities and warehouses.

 

He added: " To strengthen our portfolio for the long-term, Aims Apac Reit will continue to explore new investment opportunities and focus on asset enhancement initiatives. This is aligned with our objectives of providing stable and regular distributions and achieving long-term capital growth for unitholders."