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Ascendas REIT competes in 'tight market' with Melbourne office buy: analyst

The site is located in Australia’s emerging suburban office market.

Ascendas REIT's $103.3m acquisition of an office building in Melbourne is expected to bring attractive returns in an 'otherwise tight market,' according to a report from DBS Research. 

“Whilst AREIT has moved up the risk curve in its search for higher returns, and it appears tighter at 5.8%, we remain comfortable given the property’s location and long lease tenure,” Derek Tan, analyst at DBS Group Research said in a report

The site, located at 254 Wellington Road, is said to be the REIT’s fourth suburban office property in Australia. It is also located within the Monash Technology Precinct, an emerging suburban office market.

“Whilst the deal’s impact is minor, we like the fact that AREIT continues to “add duration” to its portfolio weighted average lease expiry (WALE) and see positives from having a quality tenant in Nissan on a long lease,” added Tan.

Nissan Motor (Australia) chose the said property to be its new headquarters, taking up 65.2% of the space with a built-in rent escalation of 3% per annum. The rent hike is said to provide a three-year guarantee on any remaining space.

Tan added that Nissan’s decision to move into the property implies the property’s ‘strong stickiness’.
 

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