AIMS AMP Reit plans $79m rights issue

Funds raised to buy warehouse and logistics facility

AIMS AMP Capital Industrial REIT (AIMSAMPIREIT) is looking to acquire a ramp-up warehouse and logistics facility for $161 million, which will be partially funded through a rights issue.

It has proposed to acquire C&P Logistics Hub 2 – located at 27 Penjuru Lane – from DB International Trust (Singapore) Limited, which is the trustee of AMP Capital Business Space REIT.

As AMP Capital Business Space REIT is indirectly wholly-owned by AMP Capital Holdings, who is the sponsor and a controlling unitholder of AIMSAMPIREIT, the acquisition is considered to be a related party transaction.

The total cost of the acquisition is $163.1 million, which includes the $161 million purchase consideration, a $1.6 million acquisition fee for AIMSAMPIREIT’s manager AIMS AMP Capital Industrial REIT Management, and about $0.5 million in professional and other fees and expenses.

To help fund the acquision, AIMSAMPIREIT has proposed to issue 513.3 million new units through a fully underwritten and renounceable rights issue on a basis of seven rights units for every 20 existing units at an issue price of $0.155 per unit. The issue price represents a discount of 32.6 per cent to the closing price of $0.23 per unit on 19 August.

This will raise gross proceeds of some $79.6 million, of which $64.5 million will be channelled toward the acquisition.

Its sponsors, AIMS Financial Group and AMP Capital Investors (Luxembourg No. 4) SARL, have agreed to subscribe for their pro rata rights entitlements of 39.28 million and 82.5 million rights units respectively. Six unitholders, including Dragon Pacific Assets Limited and APG Algemene Pensioen Groep NV, have also committed to subscribing for their pro-rata rights entitlements and in some cases, to sub-underwrite a portion of the rights issue.

The warehouse facility, with a net lettable area of 975,823 sq ft, is leased out to C&P Holdings in a master lease that will expire in December 2012. It has a net property income yield of 7.7 per cent. Its annual rental for the rental year ending Dec 11, 2010, is $13 million.

Independent valuations by Colliers International Consultancy & Valuation (Singapore) and CB Richard Ellis put the purchase consideration at $162.5 million and $165 million respectively.

‘From management’s point of view, we think that we’re buying well, in a good part of the cycle. Certainly in our experience, market rents have bottomed, valuations have bottomed,’ said Nicholas McGrath, chief executive officer of AIMS AMP Capital Industrial REIT Management. ‘What we’re seeing now is increases in market rentals across our portfolio, which will translate to increases in valuations in the future.’

The acquisition also provides for the refinancing of the trust’s existing loan on improved terms. While the existing loan has an interest margin of 3.5 per cent, the $280 million new loan will have a weighted average interest margin of 2.16 per cent. The new loan is split into three tranches – a three-year $100 million term loan facility, a three- year $80 million revolving credit facility and a five- year $100 million term loan facility.

Mr McGrath also said that AIMSAMPIREIT will look to grow its presence in Asia in the medium to long term, especially in markets such as Japan and China. In Singapore, it will carry out enhancement works to increase the net lettable area at some of its properties.

It currently has 25 properties in Singapore and one in Japan.

If the acquisition goes through, its portfolio size will increase by 25.3 per cent to nearly $800 million.

The proposed acquisition is subject to unitholders’ approval at an extraordinary general meeting, which will be held on Sep 13.