A-REIT – BT

A-Reit buys $125.6m asset, unveils placement

The property consists of two 7-storey buildings at Biomedical Grove

ASCENDAS Real Estate Investment Trust (A-Reit) is buying a property at Biopolis for $125.6 million, and is raising some $400 million through a private placement to fund the deal and other projects.

The industrial Reit is also in talks to purchase a portfolio of properties worth around $200 million, and the transaction might be completed in the next three to six months.

A-Reit gave these updates yesterday morning.

The latest property it bagged consists of two seven-storey multi-tenanted buildings – Neuros & Immunos – at Biomedical Grove. A-Reit is acquiring them from a unit of its sponsor, Ascendas.

The buildings have research laboratories and offices spread across a net lettable area of 28,345 square metres and they are fully occupied. Their sites have a lease tenure of 30+30 years from February 2005.

A-Reit said the deal is yield-accretive and would have added 0.03 cents to the distribution per unit for the financial year ended March 31, 2010, on an annualised pro forma basis.

There are some assumptions behind this; for instance that A-Reit had owned the property for the entire financial year and funded the deal using 40 per cent debt and 60 per cent equity.

The purchase price is the lower of two valuations conducted by consultants. Jones Lang LaSalle valued the property at $126 million, while CB Richard Ellis thought it was worth $125.6 million.

Transactional costs come up to around $1.9 million, which include an acquisition fee of $1.256 million payable to A-Reit’s manager.

A-Reit, in which share trading was halted yesterday, also unveiled a private placement. It will issue 206.186 million new units at $1.94 apiece to raise around $400 million in gross proceeds. Net proceeds after fees and expenses would be $393.3 million.

The private placement was ‘2.55 times oversubscribed’, A-Reit said. Its closing unit price on Wednesday was $2.04. This means the issue price carries a discount of 4.9 per cent.

The bulk of the gross proceeds will go towards buying Neuros and Immunos. Another $117.6 million is for the forward purchase of a property in Shanghai – a deal A-Reit announced earlier.

The Reit will channel another $97 million to asset enhancement works at other properties, and use $35.9 million to fund a development project.

A-Reit believes the private placement will help it ‘act more expeditiously and be more responsive when pursuing potential growth opportunities’. It revealed that it is in talks to acquire some $200 million of assets.

The private placement will also help cut A-Reit’s gearing. Its aggregate leverage as at Dec 31 was 34.7 per cent, which would fall to 32.6 per cent after revaluation gains of $307.6 million are taken into account.

Pending the deployment of the net proceeds from the private placement, the aggregate leverage goes down to 25.1 per cent.

Moody’s Investors Service does not expect the purchase of Neuros and Immunos and the private placement to have immediate impact on A-Reit’s A3 corporate family rating and Baa1 senior unsecured rating.