AREIT’s proposed $1.66bn acquisition and fund raise

AREIT has announced the acquisition of a portfolio of 28 business parks in the US and two BPs in Singapore from its sponsor CapLand, for a combined S$1.66bn (S$1.71m incl transaction cost).

The US portfolio makes up the largest portion at S$1.285bn.

The purchase will be partially funded by an S$1.3bn 16-for-100 unit Rights Issue at S$2.63 per unit, a 15% discount to the Theoretical Ex-Rights Price.

The remainder will be largely funded by debt. An Extraordinary General Meeting is set on 27 Nov 2019. The transaction, if approved, is expected to complete by end-2019.

Low NPI yield, low DPU accretion

The US portfolio is located in suburban submarkets in San Diego (8 properties), Raleigh (5) and Portland (15).

The acquisition implies a blended initial NPI (net property income) yield of 6.4%.

This is tight relative to recent transactions of Class A office properties at 6.9-7.2% by other S-REITs.