ESR-REIT revealed today (14 December) that it embarked on its biggest acquisition to date with the purchase of an 80 percent stake in a high-specification building within the Serangoon North Industrial Estate for $240 million.
Located at 7000 Ang Mo Kio Avenue 5, the property consists of a six-storey multi-tenanted production block and a five-level multi-tenanted ancillary office block connected by a covered linkway with an un-utilised plot ratio of 0.8.
As of 1 December 2017, 91.9 percent of its net lettable area of around 834,783 sq ft was occupied out of its gross floor area (GFA) of about 1,073,233 sq ft.
It also has a remaining leasehold tenure of 39 years compared to the shorter tenures of 20 to 30 years granted to new industrial sites by the government. Moreover, the owner does not need to pay an upfront land premium for the first term of nine years, and it has an option to renew for an additional leasehold tenure of 30 years.
The deal was carried out via a purchase of an 80 percent stake in 7000 AMK Pte Ltd, a firm that owns a leasehold interest in the property. While the remaining 20 percent stake will be retained by the seller, Ho Lee Properties Pte Ltd, it has grated put and call options to ESR-REIT to buy the remaining interest.
The transaction follows the trust’s purchase of a property in 8 Tuas South Lane that was completed today. It was acquired from Hyflux Membrane Manufacturing for $95 million, excluding upfront land premium and stamp duty.
Both acquisitions are expected to increase ESR-REIT’s overall portfolio value by 31.4 percent from $1.33 billion as of 30 September 2017 to $1.75 billion, which takes into account the Ang Mo Kio property’s total valuation of $303 million.
The trust’s overall occupancy rate is also projected to rise to 91.9 percent, up from JTC Corp’s average occupancy level of 88.6 percent across all industrial properties.
Meanwhile, the acquisition has been financed by internal cash resources, existing bank loans and part of the proceeds from ESR-REIT’s issuance of subordinated perpetual securities.
Its manager, ESR Funds Management (S) Limited, also intends to undertake an equity fund raising to issue up to 263 million new units in the trust by early-2018.
This article was edited by Keshia Faculin.