Sabana REIT

Sabana REIT: has proposed to acquire Advanced Micro Devices’ (AMD) light industrial building at 508 Chai Chee Lane for $67.2m (~$205m psf inclusive of upfront land premium of $7.7m). The building is a 7-storey light industrial facility with gfa of 327,571 sf and has a remaining lease tenure of 46.5yrs. AMD has committed to leaseback at least 50% of the property for a period of 10 rs, with options to renew for a further 11 yrs. UOBK estimates that the rentals AMD will be signing are btwn $2.50-3.00 psf pm, implying a 5% initial cap rate though this would rise to 7-8% upon fully leasing out the remainder of the facility to third party tenants. The house notes the acquisition will be yield accretive by about 3-5% if fully funded by debt though this will increase Sabana’s gearing from 37.1% to 40.5%, leaving little further headroom for further acquisitions. UOBK keeps its Hold rating but raises TP slightly to $1.29 from $1.27.