OUE REIT Acquires 19.9% Stake in Sydney’s Salesforce Tower: Strategic Expansion and Portfolio Growth

OUE REIT Announces Strategic Expansion into Sydney with Salesforce Tower Acquisition

Key Highlights of the Transaction

OUE REIT to Acquire 19.9% Stake in Salesforce Tower, Sydney: The REIT has entered into an agreement to acquire a 19.9% interest in Sydney’s landmark Salesforce Tower, located at 180 George Street, for an agreed property price of A\$357.2 million (approx. S\$319.8 million).
Attractive Initial Yield: The deal is based on an initial passing yield of 5.8%, which is compelling given the prime freehold nature and location of the asset.
Accretive to Distribution Per Unit (DPU): The acquisition is expected to increase pro forma DPU by 0.9% while maintaining aggregate leverage at a stable 40.2%.
Geographical Diversification: This marks OUE REIT’s maiden entry into the Australian market, enhancing portfolio quality and diversification while maintaining Singapore as its core market.
Funding Structure: The acquisition will be funded through a mix of debt and partial net sales proceeds from the divestment of Lippo Plaza Shanghai.
Completion Timeline: The transaction is expected to close in the first half of 2026 (before 27 May 2026).

Strategic Rationale and Potential Share Price Catalysts

1. Phase 3 of OUE REIT’s Value Creation Journey: Efficient Capital Allocation

The acquisition is a cornerstone initiative as OUE REIT embarks on its third phase (2026–2030) of value creation, focused on efficient capital allocation and supporting the next growth phase. This follows a period of portfolio scaling and capital structure strengthening between 2014 and 2025. The REIT has demonstrated discipline in capital recycling, unlocking asset value, and issuing green and sustainability-linked notes, further enhancing its financial flexibility and ESG credentials.

2. Strategic Expansion into Sydney’s Core CBD

Sydney’s Tallest Freehold Commercial Landmark: The 55-storey Salesforce Tower is a premium-grade, freehold asset completed in November 2022, with 61,914 sqm net lettable area and advanced sustainability and wellness features.
Prime Location: Located in Circular Quay, it boasts unrivalled connections to major transport hubs, iconic views of Sydney Harbour, and proximity to the Sydney Opera House and Royal Botanic Garden.
Built-In Growth Pipeline: OUE REIT holds pre-emptive rights for increasing its stake, offering potential for future expansion.

3. Robust Macro and Market Fundamentals

Economic Growth: Australia’s real GDP grew by 2.1% YoY in 3Q 2025, with Sydney accounting for 6% of national GDP. Strong FDI inflows and resilience in critical resource exports underpin market stability.
Favourable Office Market Trends: Sydney’s core CBD office market is supported by healthy rental growth, tightening incentives, limited new supply beyond 2027, and strong net absorption. The asset is well-placed to benefit from “flight-to-quality” trends in tenant demand.

4. Portfolio and Tenant Diversification

Reduced Concentration Risk: Post-acquisition, the proportion of Singapore assets in the portfolio will decrease slightly (from 100% to 94.9%), and the commercial segment’s revenue contribution will rise to 67.8%.
High-Quality, Well-Diversified Tenant Base: Major tenants in the Salesforce Tower include leading IT, media, telecommunications, banking, and real estate companies, mitigating income volatility and enhancing resilience.
Long WALE and Near-Full Occupancy: The property has a weighted average lease expiry (WALE) of 5.5 years by gross rental income and 6.0 years by NLA, with an overall occupancy of 99.2% as of 31 December 2025.
Pro Forma WALE Improvement: The overall REIT’s WALE extends to 2.4 years post-acquisition.

5. Financial Impact and Funding Details

Purchase Consideration and Costs: The total estimated acquisition cost is A\$201.2 million (approx. S\$180.1 million), including fees and expenses. The acquisition fee is set at 1% of the agreed property price, payable to the REIT manager.
Leverage and NAV: OUE REIT’s pro forma aggregate leverage remains stable at 40.2%, and pro forma NAV per unit is unchanged at S\$0.56.
Funding Mix: Acquisition will be funded through debt and proceeds from the previously announced divestment of Lippo Plaza Shanghai for S\$357.4 million.

Important Shareholder Considerations & Price Sensitive Factors

Accretive Acquisition: The transaction is DPU-accretive, which may support share price re-rating.
Exposure to Prime Australian Market: First overseas diversification move for OUE REIT, potentially reducing reliance on the Singapore market and enhancing future growth opportunities.
Stable Financial Position: The REIT maintains a prudent leverage ratio and strong investment grade rating (BBB- by S&P), supporting balance sheet strength.
ESG Credentials: Enhanced sustainability profile through green financing and acquisition of a highly certified, future-proof asset may attract more institutional investor interest.
Potential for Further Expansion: Built-in pre-emptive rights for increasing stake in the Salesforce Tower may provide future growth catalysts.

Conclusion

OUE REIT’s strategic acquisition of a 19.9% stake in Salesforce Tower, Sydney, marks a significant milestone in its Phase 3 growth journey. The transaction delivers immediate DPU accretion, portfolio diversification, and long-term exposure to a resilient and growing office market. With robust funding and a stable financial profile, the move positions OUE REIT as a leading diversified REIT with high-quality assets across Singapore and Australia. Shareholders should closely monitor this cross-border expansion, which has the potential to materially impact future earnings and valuations.

Disclaimer:

This article is for informational purposes only and does not constitute investment advice, an offer, or solicitation to buy or sell any securities. Investors should conduct their own due diligence and consult with their financial advisers before making investment decisions. The forward-looking statements in this article are subject to risks and uncertainties that could cause actual results to differ materially. Past performance is not indicative of future results.