AA REIT Announces S\$56.65 Million Acquisition of Prime Singapore Industrial Property: What Investors Need to Know

Major Portfolio Expansion with High-Yield City Fringe Asset

AIMS APAC REIT (AA REIT) has unveiled a major move to acquire a prime industrial property at 2 Aljunied Avenue 1, Singapore 389977 for S\$56.65 million. This transaction is designed to bolster the REIT’s portfolio both in value and resilience, with strong implications for future rental growth, portfolio yield, and unitholder returns. Here’s a deep dive into the key details and what it means for shareholders.

Key Transaction Highlights

• Purchase Consideration: S\$56.65 million (compared to the independent valuation of S\$61.60 million by JLL as at 31 July 2025)
• Year 1 Net Property Income (NPI) Yield: 8.1%, which is above the current portfolio average
• Asset Description: Business 1 Industrial Property with two buildings (4-storey and 8-storey), with a total land area of 7,481.7 sq m and gross floor area (GFA) of 18,662.1 sq m
• Occupancy: 97% (with a rental guarantee covering the remaining 3% of GFA, ensuring 100% income generation)
• Weighted Average Lease Expiry (WALE): 4.1 years as at 29 August 2025
• Main Tenants: Framework Building Products Pte Ltd (anchor tenant), Parkway Laboratory Services Pte Ltd, Avnet Asia Pte Ltd
• Land Tenure: Leasehold till 30 August 2049

Deal Structure and Tenant Security

• The transaction is a sale and anchor leaseback. Framework will occupy 70% of the property’s GFA for the first five years (with fixed annual rental escalations), and 22% of the NLA from year six onwards.
• The remaining space is occupied by established tenants from resilient sectors, including healthcare and electronics.
• There is a three-year rental guarantee over the vacant area, ensuring full rental income in the crucial initial period.

Strategic Rationale and Shareholder Impact

• DPU Accretion: The acquisition is expected to be immediately accretive to distribution per unit (DPU). Pro-forma calculations suggest a potential increase from 9.60 cents (FY2025) to 9.84 cents per unit (+2.5%) if fully debt-funded, or a smaller 0.5% increase if partially funded with equity from the 2023 equity raise.
• Aggregate Leverage: Even after the acquisition, aggregate leverage remains healthy, rising moderately from 28.9% to 30.8%.
• Portfolio Size: Grows total portfolio value from S\$2.13 billion to S\$2.19 billion, further diversifying risk.
• Sector Resilience: Post-acquisition, exposure to essential and resilient industries rises, with over 82% of gross rental income (GRI) from these sectors. Framework will contribute 1.6% of GRI — a meaningful addition to the top 10 tenants.
• Location Benefits: The asset is in a tightly held city-fringe sub-market, 10 minutes’ walk from Paya Lebar MRT interchange, and adjacent to the URA-designated commercial and retail hub. This location supports high occupancy, premium rents, and strong tenant demand.
• Future Value-Add: Flexible building configurations, high power capacity (2 MVA, expandable to 3 MVA), and sustainability credentials (rooftop solar, natural ventilation) make it suitable for high-spec tenants in healthcare, life sciences, and advanced manufacturing. There is clear potential for asset enhancement initiatives (AEI) and repositioning for higher future rents.

Risks and Forward-Looking Considerations

• The acquisition is subject to standard investment risks, including market conditions, interest rate trends, and competition from similar assets.
• Management warns that forward-looking statements are subject to uncertainties, and actual results may differ materially. Investors should not place undue reliance on these projections.
• No guarantee of liquidity on the SGX-ST, and past performance is not necessarily indicative of future outcomes.

Why This News May Move the Share Price

This acquisition is significant for AA REIT’s growth story. The high-yield, city-fringe property, immediate DPU accretion, and increased exposure to resilient sectors are all positive for shareholder value. The prudent funding mix, with only a modest rise in leverage, should reassure both income-focused and growth-oriented investors. The deal also signals management’s ability to execute on disciplined, value-enhancing acquisitions in a competitive market — a factor that could drive renewed interest in AA REIT’s units.

Key Takeaways for Shareholders

• Immediate DPU Accretion – likely to support share price and appeal to income investors.
• Strategic Asset Fit – prime location, quality tenants, and strong sectoral exposure position the REIT for stable, growing income streams.
• Healthy Balance Sheet – leverage remains conservatively managed, maintaining financial flexibility for future growth.
• Potential for Future Upside – AEI and repositioning opportunities offer growth beyond initial returns.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or an offer to buy or sell any securities. Investors should conduct their own due diligence or consult a financial adviser before making investment decisions. The author and publisher are not liable for losses arising from reliance on this information.

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