Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Equity Bottom-Up

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<p>AAREIT reported a solid 2Q22 set of results. On a QoQ basis, Revenue, NPI and DPU were up by 5.1%, 6.7%, and 11.1%, respectively, with the half-yearly figures making up 48-49% of our FY forecast. Portfolio occupancy rose by 1.6ppt QoQ to 97.3%, while rent reversion was +2.1% (reversing -0.4% in 1Q22). ~50% of lease expiring for the remainder of FY22E is in the resilient Logistics and Warehouse sector. We upgrade to BUY and note additional upside to our TP from Woolworths HQ and Alexandra Rd acquisition.</p>
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AAREIT reported a solid 2Q22 set of results. On a QoQ basis, Revenue, NPI and DPU were up by 5.1%, 6.7%, and 11.1%, respectively, with the half-yearly figures making up 48-49% of our FY forecast. Portfolio occupancy rose by 1.6ppt QoQ to 97.3%, while rent reversion was +2.1% (reversing -0.4% in 1Q22). ~50% of lease expiring for the remainder of FY22E is in the resilient Logistics and Warehouse sector. We upgrade to BUY and note additional upside to our TP from Woolworths HQ and Alexandra Rd acquisition.





AIMS APAC REIT: Strong Quarter; Upgrade to BUY

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<p>AAREIT has acquired Woolworths HQ in Sydney for ~S$454m, which increases its asset size by ~27% to S$2.18bn. The asset sits on a 9ha freehold land with a development potential of up to 4x of its current NLA of ~45,000sqm. On a FY21A pro-forma basis, this transaction is DPU accretive by 4.7%. Given resilient Logistics segment (38% of portfolio) and new mgmt’s continued focus on executing inorganic growth strategy (Alexandra Rd in pipeline), we are positive on the direction of AAREIT.</p>
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AAREIT has acquired Woolworths HQ in Sydney for ~S$454m, which increases its asset size by ~27% to S$2.18bn. The asset sits on a 9ha freehold land with a development potential of up to 4x of its current NLA of ~45,000sqm. On a FY21A pro-forma basis, this transaction is DPU accretive by 4.7%. Given resilient Logistics segment (38% of portfolio) and new mgmt’s continued focus on executing inorganic growth strategy (Alexandra Rd in pipeline), we are positive on the direction of AAREIT.




AIMS APAC REIT: Transformative Acquisition; Significant Development Potential

Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/aims-amp-capital-industrial" target="_blank" data-smartkarma-citation="entities:933" rel="noopener">AIMS APAC REIT (AAREIT SP)</a> to acquire Woolworths headquarters at 5.17% NPI yield; Accretive to DPU by 4.7%</h3><ul><li>AAREIT has acquired Woolworths headquarters for a purchase consideration of AUD463.25m (~S$454.0m) from Inmark Asset Management. The property is fully leased to Woolworths Group – Australia’s largest supermarket retailer, top 10 ASX listed companies. Woolworths HQ property is a corporate campus with a total site area of 90,010sqm and a total NLA of 44,972sqm. The current NLA provides for significant development potential to circa 180,000sqm based on the maximum allowable GFA. The purchase consideration of AUD463.25m excludes transaction costs of ~AUD31.0m. As such, the total acquisition cost is AUD494.25m (~S$484.4m)</li><li>The property has a long-term lease balance of 10 years and built-in rental escalation of 2.75% pa. Portfolio value will be enlarged by 26.6% to over S$2.28bn, while WALE will rise to 4.92 years. Portfolio occupancy will rise to 95.9% (from 95.7%) and master lease will represent 48% of total portfolio (from 38%)</li><li>The initial NPI yield is 5.17% and AAREIT plans to funding this acquisition through a combination of debt financing, recently issued S$250m perpetual securities, and potentially EFR. The funding structure utilising local debt financing (56%) and perpetual securities (44%) will bring aggregate leverage to 38.6% and result in DPU accretion of 4.7% on FY21 pro-forma basis. Upon settlement, the Manager has elected to receive the acquisition fee in AAREIT units</li><li>Following the completion of the proposed acquisition, AAREIT will have a total of 29 properties, of which 26 properties are located throughout Singapore (62%) and the remaining in Australia (38%).</li></ul>

SingaporeAIMS APAC REIT (AAREIT SP) to acquire Woolworths headquarters at 5.17% NPI yield; Accretive to DPU by 4.7%AAREIT has acquired Woolworths headquarters for a purchase consideration of AUD463.25m (~S$454.0m) from Inmark Asset Management. The property is fully leased to Woolworths Group – Australia’s largest supermarket retailer, top 10 ASX listed companies. Woolworths HQ property is a corporate campus with a total site area of 90,010sqm and a total NLA of 44,972sqm. The current NLA provides for significant development potential to circa 180,000sqm based on the maximum allowable GFA. The purchase consideration of AUD463.25m excludes transaction costs of ~AUD31.0m. As such, the total acquisition cost is AUD494.25m (~S$484.4m)The property has a long-term lease balance of 10 years and built-in rental escalation of 2.75% pa. Portfolio value will be enlarged by 26.6% to over S$2.28bn, while WALE will rise to 4.92 years. Portfolio occupancy will rise to 95.9% (from 95.7%) and master lease will represent 48% of total portfolio (from 38%)The initial NPI yield is 5.17% and AAREIT plans to funding this acquisition through a combination of debt financing, recently issued S$250m perpetual securities, and potentially EFR. The funding structure utilising local debt financing (56%) and perpetual securities (44%) will bring aggregate leverage to 38.6% and result in DPU accretion of 4.7% on FY21 pro-forma basis. Upon settlement, the Manager has elected to receive the acquisition fee in AAREIT unitsFollowing the completion of the proposed acquisition, AAREIT will have a total of 29 properties, of which 26 properties are located throughout Singapore (62%) and the remaining in Australia (38%).

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/city-developments-ltd" target="_blank" data-smartkarma-citation="entities:57" rel="noopener">City Developments (CIT SP)</a> sells Sincere stake for US$1; Raises stake in Shenzhen tech park</h3><ul><li>CIT has exited its investment in China-based Sincere Property Group for a consideration of US$1, while raising its stake in a technology park in Shenzhen. CIT has agreed to sell its 63.75% interest in HCP Chongqing Property Development (HCP Cayman) to an unrelated third party incorporated in the Republic of Seychelles. HCP Cayman holds an 80.01% equity interest in Sincere</li><li>The consideration was agreed upon after taking into account Sincere's current liquidity issues and its potential bankruptcy. For FY20, CIT had booked a S$1.78bn impairment for losses attributable to Sincere – effectively writing down 93% of its total investment in Sincere. Concurrently, CIT is increasing its stake in a company that owns 65% of Shenzhen Longgang Tusincere Tech Park. A Shenzhen Longgang District state-owned enterprise holds the remaining 35%</li></ul>

SingaporeCity Developments (CIT SP) sells Sincere stake for US$1; Raises stake in Shenzhen tech parkCIT has exited its investment in China-based Sincere Property Group for a consideration of US$1, while raising its stake in a technology park in Shenzhen. CIT has agreed to sell its 63.75% interest in HCP Chongqing Property Development (HCP Cayman) to an unrelated third party incorporated in the Republic of Seychelles. HCP Cayman holds an 80.01% equity interest in SincereThe consideration was agreed upon after taking into account Sincere's current liquidity issues and its potential bankruptcy. For FY20, CIT had booked a S$1.78bn impairment for losses attributable to Sincere – effectively writing down 93% of its total investment in Sincere. Concurrently, CIT is increasing its stake in a company that owns 65% of Shenzhen Longgang Tusincere Tech Park. A Shenzhen Longgang District state-owned enterprise holds the remaining 35%

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/ascott-residence-trust" target="_blank" data-smartkarma-citation="entities:6560" rel="noopener">Ascott Residence Trust (ART SP)</a> acquires student accommodation property in Texas for US$70m; 5.1% EBITDA yield</h3><ul><li>ART has entered into a conditional sale and purchase agreement to acquire a student accommodation property located in Texas, USA for US$70m (~S$93.8m). Based on the independent valuation, the property is valued at US$72.0m (~S$96.5m). The property is a freehold, off-campus facility with 1,005 beds and serves Texas Tech University and is 100% leased for the 2021 academic year. Texas Tech University has over 40,000 students</li><li>On a pro forma basis, the acquisition is expected to contribute additional EBITDA of US$3.6m (~S$4.8m), translating to an expected EBITDA yield of 5.1%, and increase distributable income by S$3.3m for FY20, translating to an increase in pro forma distribution per stapled security of ~1.5%</li><li>Completion is subject to and conditional upon, the fulfilment of the conditions precedent in the Sale and Purchase Agreement and is expected to take place on or around 21Sep. ART proposes to finance the total acquisition costs from the private placement to raise gross proceeds of ~S$150.0m and debt financing. Following completion of the acquisition, ART’s aggregate leverage would remain at 35.9%.</li></ul>

SingaporeAscott Residence Trust (ART SP) acquires student accommodation property in Texas for US$70m; 5.1% EBITDA yieldART has entered into a conditional sale and purchase agreement to acquire a student accommodation property located in Texas, USA for US$70m (~S$93.8m). Based on the independent valuation, the property is valued at US$72.0m (~S$96.5m). The property is a freehold, off-campus facility with 1,005 beds and serves Texas Tech University and is 100% leased for the 2021 academic year. Texas Tech University has over 40,000 studentsOn a pro forma basis, the acquisition is expected to contribute additional EBITDA of US$3.6m (~S$4.8m), translating to an expected EBITDA yield of 5.1%, and increase distributable income by S$3.3m for FY20, translating to an increase in pro forma distribution per stapled security of ~1.5%Completion is subject to and conditional upon, the fulfilment of the conditions precedent in the Sale and Purchase Agreement and is expected to take place on or around 21Sep. ART proposes to finance the total acquisition costs from the private placement to raise gross proceeds of ~S$150.0m and debt financing. Following completion of the acquisition, ART’s aggregate leverage would remain at 35.9%.

Singapore

AIMS APAC REIT is a real estate investment trust. The Trust's principal investment objective is owning and investing in a diversified portfolio of income-producing industrial real estate assets throughout Asia Pacific, including warehousing and logistics, manufacturing, business parks and hi-tech spaces.

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AIMS APAC REIT (AAREIT SP)

AIMS APAC REIT: Strong Quarter; Upgrade to BUY

AAREIT reported a solid 2Q22 set of results. On a QoQ basis, Revenue, NPI and DPU were up by 5.1%, 6.7%, and 11.1%, respectively, with the half...

SCCM Asia Research

AIMS APAC REIT: Transformative Acquisition; Significant Development Potential

AAREIT has acquired Woolworths HQ in Sydney for ~S$454m, which increases its asset size by ~27% to S$2.18bn. The asset sits on a 9ha freehold land...

SCCM Asia Research

ASEAN Builder's Scoop (1Oct21)

AAREIT acquires Woolworths HQ, DPU accretive by +4.7%; Luxury condo prices climbing 5.2% YoY in 3Q21; Mapletree buys S$4bn US logistics assets; SC...

SCCM Asia Research

ASEAN Builder's Scoop (13Sep21)

CIT sells Sincere stake, raises stake in Shenzhen tech park; Hoi Hup/Sunway JV acquires Flynn Park enbloc; TSH focuses in SG, Indo, AUS; MREIT...

SCCM Asia Research

ASEAN Builder's Scoop (9Sep21)

ART acquires Texas student housing asset; AAREIT conducting due diligence on AUS asset; FRAG applies for delisting; LPKR increases FY21 mktg sales...

SCCM Asia Research

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