Suntec REIT (SGX:T82U) is diversifying its portfolio to UK by acquiring 50% stake of two Grade A office buildings, Nova Properties at London’s West End. The remaining 50% interest will continue to be held by UK-listed Land Securities Group, the developer and asset manager of the Nova Properties. The acquisition is expected to be completed in Dec 2020.
What You Need To Know
The two assets have a net property income yield of 4.6%, which will provide a DPU accretion of 4.9% to Suntec REIT. The acquisitions will help to enhance the resilience and quality of Suntec REIT’s portfolio with stable income contribution and long weighted average lease expiry of 10.6 years. Besides, the deal also comes with 2-year rental guarantee to help the REIT to navigate through the potential impact by the pandemic.
With the acquisitions, Suntec REIT’s assets under management will grow from $10.7 billion to $11.5 billion with a total of 10 properties in Singapore (77.2%), Australia (16.1%) and the United Kingdom (6.7%). Both of the Properties are 100% occupied by quality office tenants with a weighted average lease expiry of 10.6 years. It will help the REITs to lengthen its weighted-lease-to-expiry to 4.4 years.
Suntec REIT is currently trading at 4.5% yield. The proposal will be subjected for the shareholders' approval at an EGM in the coming months. In general, we are bullish on the acquisition as it is both DPU accretive and helps to improve the portfolio diversification.
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