AIMS APAC REIT Makes Strategic S\$60 Million Acquisition in Paya Lebar: DPU Accretion, Rental Guarantees, and Key Leaseback Details Revealed

Key Points

• Proposed Acquisition: AIMS APAC REIT (AA REIT) to acquire Framework Building at 2 Aljunied Avenue 1, Singapore for approximately S\$56.65 million (including S\$10.9 million JTC upfront land premium).
• Property Details: Multi-tenanted industrial complex with two buildings, total net lettable area (NLA) of ~16,082.4 sqm, strategically located near the Paya Lebar commercial hub.
• Valuation: Independent valuer JLL appraised the property at S\$61.6 million, meaning AA REIT is acquiring at an 8% discount.
• Leaseback Arrangements: Framework (the seller) will lease back 70% of the property’s GFA for 5 years with upfront and bank-guaranteed rent security; 22% of NLA for a further year. Rental guarantee provided for vacant units.
• Financial Impact: Acquisition expected to be DPU-accretive, with up to 2.5% accretion based on 100% debt funding, and 0.5% accretion based on a mix of debt and equity.
• Funding: The deal will be fully debt funded, but there is flexibility to use proceeds from the 2023 equity fundraising.
• Portfolio Impact: Post-acquisition, portfolio size will increase from S\$2.13 billion to S\$2.19 billion, with higher exposure to resilient, high-quality industrial assets in Singapore.
• Strategic Rationale: Strong location, established tenants, income stability, and future value-add potential highlighted as key reasons for the deal.
• Transaction Classification: The deal is classified as a “discloseable transaction”—not requiring unitholder approval, but still material for the REIT.

Detailed Analysis of the Acquisition and Its Implications

AIMS APAC REIT (AA REIT) has announced a major move to expand its Singapore portfolio, entering into an agreement to acquire the Framework Building at 2 Aljunied Avenue 1 for a total consideration of S\$56.65 million. This figure includes the purchase price of S\$45.75 million and an upfront land premium payable to JTC of up to S\$10.9 million. The transaction is expected to complete around the third quarter of FY2026.

About the Property

The Framework Building is a substantial city-fringe industrial asset, comprising a 4-storey block (built in 1993, refurbished in 2008) and an 8-storey block (completed in 2014). The total gross floor area is approximately 18,662 sqm, with an NLA of about 16,082 sqm. The site is on a 30-year leasehold running from September 2019 to August 2049, offering long-term tenure for the REIT’s portfolio. The location is highly strategic—being a short walk from Paya Lebar MRT and close to major expressways and retail hubs.

Purchase Price and Valuation

The purchase consideration was negotiated on a willing-buyer, willing-seller basis, and is 8% below the independent valuation by Jones Lang LaSalle (S\$61.6 million). This discount could provide immediate value uplift for unitholders.

Transaction Structure and Safeguards

• Upon signing, AA REIT paid an option fee of S\$457,500. To exercise the option, an additional S\$1.83 million will be paid, both forming the deposit.
• The deposit is refundable if the deal is rescinded under several protective clauses, including unsatisfactory JTC approvals, major tenant withdrawals, or government acquisition notices.
• Completion is expected within three weeks of exercising the option, subject to conditions being met.

Leaseback and Rental Guarantees Securing Income Stream

• First Lease: Framework will lease back 70% of the property’s GFA for 5 years, with rent for the first year paid upfront and subsequent years secured by bank guarantees. Framework is also responsible for all upkeep and maintenance.
• Second Lease: After the initial 5-year period, Framework will lease 22% of NLA for another year, again secured by a bank guarantee covering the full rental obligation.
• Rental Guarantee: On completion, Framework will pay S\$0.37 million (including GST) as a rental guarantee for the vacant premises. If a new tenant is secured during the guarantee period, the guarantee amount is refunded accordingly. The rental guarantee is in line with market standards, according to JLL.

Financial Impact: DPU Accretion and Leverage

• Total Acquisition Cost: S\$60.38 million (including stamp duty, acquisition fees, and other expenses).
• Funding: Fully debt-funded with the option to use S\$36.20 million from the 2023 equity fundraising. The pro forma aggregate leverage rises modestly from 28.9% to 30.8% post-acquisition.
• DPU Accretion: On a 100% debt-funded basis, the acquisition would have increased FY2025 DPU by 2.5%. With a 40:60 debt-to-equity mix, DPU accretion is 0.5%.
• Net Asset Value: NAV per unit remains steady at S\$1.23 post-acquisition.

Portfolio and Strategic Benefits

• Portfolio Growth: REIT’s portfolio size grows to S\$2.19 billion, with Singapore exposure increasing from 76.9% to 77.5% of gross rental income.
• Resilient Income Stream: The property is 97% occupied, with a 3-year rental guarantee on the remaining 3%. Key tenants include Framework (70% of occupied area), Parkway Laboratory Services (18%), and Avnet Asia (9%).
• Asset Quality and Future Potential: The buildings feature high power capacity, sustainability credentials (solar panels, natural ventilation), and potential for asset enhancement initiatives post-leaseback.
• Tenant Diversification: Framework will become a top-10 tenant by rental income, and the acquisition further diversifies the REIT’s tenancy mix.

Shareholder and Regulatory Notes

• Transaction Classification: As a “discloseable transaction” under SGX rules, the deal does not require unitholder approval but is significant in size and impact.
• Directors’ Interests: Directors of the Manager collectively hold 152.7 million units, with no other material interests disclosed.

What Retail Investors Should Watch

• Distribution Growth: The acquisition is immediately DPU-accretive, which is positive for income-focused investors.
• Risk Management: Strong rental guarantees and leaseback terms provide downside protection, but investors should note the leverage increase and the industrial market cycle risks.
• Strategic Positioning: The move consolidates AA REIT’s position in high-quality Singapore industrial assets, potentially enhancing long-term value and portfolio resilience.
• Market Sensitivity: The discounted purchase price, immediate DPU uplift, and secured income stream are all potentially price-sensitive positives that may support the unit price.

Conclusion

This acquisition marks a significant, well-structured expansion for AIMS APAC REIT, providing immediate yield accretion, stable income, and future growth potential in a premium location. Investors should closely monitor management’s execution, leasing progress, and the integration of the asset into the broader portfolio, as these factors will be key to realising the full benefits of the transaction.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The value of units in AIMS APAC REIT may rise or fall. Past performance is not indicative of future results. Please consult your financial advisor before making investment decisions. The author and publisher accept no liability for any losses arising from reliance on this article.

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