AIMS APAC REIT and joint venture partner Stockland have entered a new lease agreement with existing tenant Optus Administration for another 12-year term for the Optus Centre property in Australia, the REIT said Monday.
The lease is one of Australia’s largest recorded lease deals, the REIT said in a filing to SGX.
The new lease will begin 1 July 2021, after the completion of an asset enhancement initiative (AEI) to meet the requirements of Optus, which is a wholly owned subsidiary of Singtel Optus, Australia’s second-largest telecommunications company, the REIT said.
The property, which is a campus housing six buildings, will remain operational while the renovation work is ongoing, AA REIT said.
“The new agreement for lease arrangement and AEI will significantly enhance the quality and value of our Optus Centre property in a market currently experiencing limited supply of quality business park assets,” Koh Wee Lih, the CEO of the REIT’s manager, said in the statement.
Under the deal, the new master lease will have annual rental escalation of 3.25 percent on face rent and two five-year options to extend the lease, AA REIT said.
The estimated net property income for the lease’s first year is around A$28.3 million, with average net property income over the term, including rental escalation, estimated at around A$36.5 million, AA REIT said.
Based on the latest valuation of Optus Centre, located in Macquarie Park, New South Wales, and the REIT’s purchase price in 2014, the deal marks a pre-tax equity internal rate of return (IRR) of around 17.1 percent a year, AA REIT said.
On a pro forma basis, AA REIT said its net asset value per unit as of end-September would have increased to S$1.38 from S$1.32.
Optus is the REIT’s largest tenant, contributing 12.3 percent of its gross rental income in the July-to-September quarter, AA REIT said. The Optus Centre property marked 14.7 percent of the REIT’s total portfolio valuation and 6.4 percent of the portfolio’s net lettable area, the filing said.
Optus Centre, located in northern Sydney, is owned through AA REIT’s 49 percent stake in Macquarie Park Trust, with joint venture partner Stockland holding the remainder, the filing said.
Singtel Optus is a wholly owned subsidiary of Singapore-based Singtel.