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

SCCM Asia Research

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

Singapore Real estate / Thematic (Sector/Industry)

<h2>Singapore</h2><h3><a href="https://www.smartkarma.com/entities/prime-us-reit" target="_blank" data-smartkarma-citation="entities:28144" rel="noopener">Prime US REIT (PRIME SP)</a> to acquire two properties in California and Florida; DPU accretive by +2.4% but -1.2% NAV dilutive</h3><ul><li>PRIME, through KBS Realty Advisors, has entered into a purchase agreement with Sorrento Towers North to acquire Sorrento Towers (located at 5355 &amp; 5375 Mira Sorrento Place, San Diego, California) and a purchase agreement with CP OTC to acquire the property One Town Center (located at One Town Center, Boca Raton, Florida). Sorrento Towers is a freehold property comprised of two, seven-story, Class-A office towers and sits above a three-level podium garage with an occupancy rate of 95.6%, NLA of 296,327sqft and WALE By NLA of 6.6 years. One Town Center is a freehold 10-storey Class-A office tower and a five-storey attached parking garage with an occupancy rate of 94.7%, NLA of 191,294sqft and WALE by NLA of 6.2 years</li><li>The aggregate purchase consideration payable for the Acquisitions is US$245.5m, comprising US$146.0m for Sorrento Towers and US$99.5m for One Tower Center. Sorrento Towers would be acquired at valuation, whilst One Town Center will be acquired at a discount of 2.5% of its appraised value, representing an aggregate discount of 1%. The estimated total cost for the acquisitions is US$247.71m, including fees, which will be funded by a combination of loans and a private placement of new units (to raise gross proceeds of at least US$80.0m)</li><li>The Acquisitions will expand the REIT’s footprint in two new target markets, San Diego and Boca Raton. Post-acquisitions, no single market will contribute more than 11.7% of PRIME’s enlarged portfolio Cash Rental Income. In aggregate, the acquisitions have a long WALE of 6.5 years by NLA and 6.6 years by Cash Rental Income, with minimal proportion of leases expiring before 2025</li><li>100% of the leases at Sorrento Towers and One Town Center, based on Cash Rental Income for the month of Mar21, offers visible organic growth having a built-in rental escalation with a weighted average built-in escalation rate of c.3% pa. Moreover, both Sorrento Towers and One Town Center have positive office market dynamics with in-place rents that are currently below market</li><li>At the purchase price, the implied capitalisation rate for Sorrento Towers and One Town Center is approximately 5.3% and 5.8%, respectively. On a pro-forma 1Q21 basis, the WALE of the enlarged portfolio will increase to 4.5 years by NLA and 4.6 years by Cash Rental Income. On a pro-forma FY20 basis, the acquisitions are expected to be +2.4% DPU accretive, but -1.2% NAVPU dilutive. Gearing will increase to 39.1% from 33.8% as at 31Mar21 on a pro-forma basis.</li></ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/962/original/image003+%282%29.png?1624498042" class="editor-image img-responsive" data-smartkarma-image-id="214962"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/963/original/image004.png?1624498057" class="editor-image img-responsive" data-smartkarma-image-id="214963"></figure></section>

SingaporePrime US REIT (PRIME SP) to acquire two properties in California and Florida; DPU accretive by +2.4% but -1.2% NAV dilutivePRIME, through KBS Realty Advisors, has entered into a purchase agreement with Sorrento Towers North to acquire Sorrento Towers (located at 5355 &amp; 5375 Mira Sorrento Place, San Diego, California) and a purchase agreement with CP OTC to acquire the property One Town Center (located at One Town Center, Boca Raton, Florida). Sorrento Towers is a freehold property comprised of two, seven-story, Class-A office towers and sits above a three-level podium garage with an occupancy rate of 95.6%, NLA of 296,327sqft and WALE By NLA of 6.6 years. One Town Center is a freehold 10-storey Class-A office tower and a five-storey attached parking garage with an occupancy rate of 94.7%, NLA of 191,294sqft and WALE by NLA of 6.2 yearsThe aggregate purchase consideration payable for the Acquisitions is US$245.5m, comprising US$146.0m for Sorrento Towers and US$99.5m for One Tower Center. Sorrento Towers would be acquired at valuation, whilst One Town Center will be acquired at a discount of 2.5% of its appraised value, representing an aggregate discount of 1%. The estimated total cost for the acquisitions is US$247.71m, including fees, which will be funded by a combination of loans and a private placement of new units (to raise gross proceeds of at least US$80.0m)The Acquisitions will expand the REIT’s footprint in two new target markets, San Diego and Boca Raton. Post-acquisitions, no single market will contribute more than 11.7% of PRIME’s enlarged portfolio Cash Rental Income. In aggregate, the acquisitions have a long WALE of 6.5 years by NLA and 6.6 years by Cash Rental Income, with minimal proportion of leases expiring before 2025100% of the leases at Sorrento Towers and One Town Center, based on Cash Rental Income for the month of Mar21, offers visible organic growth having a built-in rental escalation with a weighted average built-in escalation rate of c.3% pa. Moreover, both Sorrento Towers and One Town Center have positive office market dynamics with in-place rents that are currently below marketAt the purchase price, the implied capitalisation rate for Sorrento Towers and One Town Center is approximately 5.3% and 5.8%, respectively. On a pro-forma 1Q21 basis, the WALE of the enlarged portfolio will increase to 4.5 years by NLA and 4.6 years by Cash Rental Income. On a pro-forma FY20 basis, the acquisitions are expected to be +2.4% DPU accretive, but -1.2% NAVPU dilutive. Gearing will increase to 39.1% from 33.8% as at 31Mar21 on a pro-forma basis.

ASEAN Builder's Scoop (24Jun21) - PRIME Acquires US Offices