AIMS APAC REIT’s Gold Coast seen as attractive acquisition

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AIMS APAC REIT’s acquisition of a light industrial property in Gold Coast, Australia, is attractive as it will boost its dividend yields to 7.5 percent a year for 2020-21, DBS said in a note last week.

Last week, AA REIT entered a deal to acquire a Queensland, Australia, property for A$38.46 million, or around S$36.92 million, from GSM Rocket Australia.

The property will be leased back to GSM (Operations), with an initial term of 12 plus five years, with fixed rent escalations of 3 percent a year and a rent review in year seven of the lease, DBS noted.

“This provides AA REIT with a new steady long-term income stream, and potentially higher growth post its mid-term rent review. Given first year net property income of A$3 million, implies an attractive headline net property income yield of 7.8 percent,” DBS said.

“Attractive near-term purchase considerations aside, we believe that the acquisition was also partly driven by positive economic tailwinds in Gold Coast, such as population growth, major infrastructure developments and anticipated increases in domestic and offshore tourism into the region,” DBS said.

DBS noted the property will be AA REIT’s second in Australia, and it raise the exposure to the country to 15.1 percent of gross rental income, from 13.1 percent previously.

The bank kept a Buy call on the industrial REIT, with a S$1.50 target price.

“Being predominantly focused on Singapore, we like AIMS APAC REIT (AA REIT) for its diversified asset portfolio and attractive exposure to in-demand properties such as business parks and modern ramp-up facilities,” DBS said.

“Supported by master leases with built-in rental escalations, AA REIT offers investors a higher degree of income certainty ahead of the sector’s anticipated recovery in 2020,” it added.

The bank pointed to potential re-development for some of the REIT’s properties, which could increase its gross floor area and revenue.

It also said AA REIT could be an acquisition target as industrial REITs consolidate, given its ability to redevelop some properties

The unit price ended Friday up 0.72 percent at S$1.40.


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