What’s New
AREIT just announced its acquisition of Aperia, a new industrial mixed-use property on a 60-year leasehold land parcel with NLA of 747k sf for SGD458m (SGD613 psf). Located in Kallang iPark, the development consists of two business towers with a three-storey retail and amenity space. It offers high-spec space for industrial and supporting businesses and white space for retail facilities and amenities. Precommitment for 46% of the space has been secured with advanced negotiations for another 15%. Aperia will be home to companies such as Intel, Roche Diagnostics, Audi, Cardinal Health, McDonald’s, and popular retailers such as Cold Storage, Tim Ho Wan and Old Town Café. Aperia obtained its TOP on 16 Jun 2014. The acquisition will be partially funded (SGD274m) by gross proceeds of SGD406.4m from AREIT’s private placement of 160m new units in Mar 2013. The rest of the money will come from debt. Accordingly, AREIT’s gearing could climb from 31.6% as of 30 Jun to 34.0%.
What’s Our View
We expect modest yield accretion, with a stabilised NPI yield of 6.2%. We forecast an initial average passing rent of SGD4.80 psf/month and initial occupancy of 68% for FY3/15E, before improvements to 95% on a stabilised basis in FY3/17E. Reiterate BUY with a slight increase in our DDM TP to SGD2.66 from SGD2.65, factoring in this acquisition (cost of equity 7%, TG 1%).
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