AIMS APAC REIT - Maybank Kim Eng 2021-10-04: A Transformative Deal, Acquisition Of Woolworths’ HQ Strengthens Portfolio

AIMS APAC REIT (SGX:O5RU)

AIMS APAC REIT - A Transformative Deal

AIMS APAC REIT (SGX:O5RU) has proposed to acquire Woolworths’ Sydney HQ for AUD463.2m (S$454.0m). See AIMS APAC REIT's announcements. It would be its largest acquisition to date, as it boosts AUM by ~27% to S$2.2b and increases its Australian contribution from 21.8% to 38.4%.
Post-deal, Woolworths will rank as AIMS APAC REIT's largest tenant at 15.7% of gross rental income, while DPU visibility rises from a longer 4.92-year portfolio WALE (from 3.98 years).

Beyond a 4.7% DPU boost, longer-term upside could arise from potential development opportunities.
Our forecasts and DDM-based S$1.60 target price (COE: 7.6%, LTG: 1.5%) for AIMS APAC REIT are unchanged pending deal completion expected in four weeks.
AIMS APAC REIT’s liquidity has improved following its inclusion into the FTSE NAREIT Index. Valuations are undemanding at 6.9% FY22E DPU yield, and 1.0x P/B; BUY.

The ~45k sqm NLA freehold property in Bella workforce growth of ~47% between 2020 and 2031, according to the local Hills Shire Council.

This is above the AUD336.5m (S$333.3m), 6.07% NPI yield that Inmark Asset Management paid for the property in 2016, which indicates cap rate compression and ~AUD50m in AEIs by Woolworths.
The tighter yield versus recent acquisitions in Macquarie Park by Ascendas REIT (SGX:A17U) (of MQX4 at 6.1% NPI yield) and Keppel REIT (SGX:K71U) (Pinnacle Office Park at 5.25%), reflects the asset’s longer 10-year WALE, which is subject to a built-in 2.75% pa rental escalation. Scope for redevelopment, with unutilised NLA (to 180k sqm) for expanding business park or data centre usage, suggests longer-term valuation upside.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-10-04

SGX Stock Analyst Report BUY MAINTAIN BUY 1.600 SAME 1.600