The manager of Ascendas REIT has announced that it will be acquiring a cold storage logistics facility at 1 Buroh Lane in Singapore on Sept 14.
The facility will be acquired from A3 Lux Alpha S.a.r.l for a consideration of $191.9 million. Including fees, the total cost of the proposed acquisition is estimated to be around $196.2 million.
The facility will be the first cold storage facility investment in Singapore, says William Tay, executive director and CEO of the manager.
The modern Grade A, five-storey ramp-up logistics facility, which was built seven years ago, is said to be one of the best in Singapore. It is located within the Jalan Buroh Food Zone in the western region of Singapore where over 30 licensed food establishments are located at. It is also located within a five-minute drive to the Ayer Rajah Expressway (AYE) and is within close proximity to Jurong Port and Tuas Mega Port. It has a remaining lease of 21 years.
“Featuring a good combination of chiller, freezer and ambient storage spaces, it caters to a diverse food and beverage storage requirements,” adds Tay. “We are confident to achieve good rental growth due to the limited supply and strong demand for this type of facilities.”
According to the REIT manager, the acquisition is “well aligned” with the REIT’s strategy to expand its logistics portfolio with “quality properties” on the back of the continued healthy demand for warehouse space in Singapore.
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Companies are expected to increase inventory levels amidst supply chain disruptions, higher freight cost and inflationary pressures, says the REIT manager. In addition, the availability of logistics space in Singapore remains limited as the upcoming logistics supply has achieved high pre-commitment rates.
Furthermore, as the food sector in Singapore is highly regulated by the authorities, certain food storage and food processing can only be conducted within designated food zones. “Limited supply of good quality cold storage facilities is expected to underpin demand and rent growth for this sub-segment,” continues the REIT manager.
As at June 30, the property is fully occupied by five well-established tenants including a supermarket chain and leading distributors of fruits and vegetables. It has a long weighted average lease expiry (WALE) of 7.0 years with built-in rent escalations of 2% to 3% every three years.
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The acquisition is expected to expand Ascendas REIT’s customer base and strengthen its income stability.
On a pro forma basis, the proportion of logistics properties in the REIT’s portfolio will rise to 26% or $4.31 billion of the REIT’s total investment properties valued at $16.75 billion.
Post-acquisition, the estimated net property income (NPI) yield is expected to be at 7.0% and 6.9% pre-transaction costs and post-transaction costs respectively.
The REIT’s distribution per unit (DPU) is expected to increase by 0.56% or 0.086 cents on a pro forma basis for the FY2021 ended Dec 31, 2021, assuming the acquisition was completed on Jan 1, 2021.
The cost of the acquisition is expected to be funded by the REIT through internal resources and/or existing debt facilities.
The acquisition is expected to be completed in the fourth quarter of 2022.
Shares in Ascendas REIT closed flat at $2.90 on Sept 13.
