Cache Reit to buy warehouse for $66m

Business Times: Tue, May 08

CACHE Logistics Trust is making its biggest buy to date in the form of a ramp-up logistics warehouse facility, for which it will shell out $66 million. The real estate investment trust's manager, ARA-CWT Trust Management, said yesterday that Cache will purchase the Pandan Road located Pandan Logistics Hub from CWT Ltd under a sale and leaseback arrangement. CWT is a controlling shareholder of ARA-CWT - a joint-venture Reit management company between ARA Asset Management and CWT. ARA-CWT said that the purchase was made at an arm's length, willing-buyer and willing-seller basis. The property is the second acquisition that Cache has made to date under the Rights of First Refusal (ROFR) arrangement with CWT as its sponsor. Among the reasons that led to the purchase is the net property income yield of 7.6 per cent for Pandan Logistics Hub, said ARA-CWT. The acquisition also allows Cache to increase its market share of ramp-up warehouses in Singapore to 22.9 per cent from 21.2 per cent. The lease agreements signed with CWT will also "provide an average contracted lease term of 4.3 years, with locked-in annual rental escalation and terms of a typical triple net lease for three years", said ARA-CWT. "The unitholders will benefit from the high occupancy rate and Pandan Logistics Hub brings Cache's total assets under management to $944 million," it added. The building is currently fully occupied by end-users who have entered into service agreements with CWT. The acquisition of Pandan Logistics Hub will also raise Cache's assets under management by 7.5 per cent to $944 million (based on valuations of the Cache's existing portfolio of properties as at end last year). "The Manager believes that the increased portfolio size will create a stronger platform for further acquisition growth due primarily to better access to both the capital markets and the debt markets," said ARA-CWT in a statement. ARA-CWT intends to finance the buy by drawing down on debt facilities. A circular on the purchase is expected to be issued to unitholders "in due course, together with a notice of extraordinary general meeting of unitholders, for the purpose of seeking the approval for the transactions", said ARA-CWT. Pandan Logistics Hub is a new five-storey fully ramp-up warehouse with a gross floor area of 329,109 square feet. It sits on a land area of 133,680 sq ft with a land lease tenure of 30 years that began in October 2009. The facility received its temporary occupation permit in October last year. In March, property valuer CKS Property Consultants said that the "open market value" of Pandan Logistics Hub was $66.5 million. Knight Frank, which also valued the property, said its "open market value" was $66 million. Both were asked by ARA-CWT and Cache's trustee, HSBC Institutional Trust Services (Singapore) Ltd, to value the property. Yesterday, Cache's units closed 0.5 per cent lower at $1.03. Source: Business Times