Dear investors, please be advised that CapitaLand Ascendas REIT (CLAR) has announced its plans to acquire DHL Indianapolis Logistics Center, a top-quality logistics property, from Exel Inc. d/b/a DHL Supply Chain (DHL USA) for an estimated price of $150.3 million. This acquisition presents a discount of 4.1% to the independent market evaluation of the property on January 1, 2025. After considering transaction-related fees and expenses of $1.7 million and an acquisition fee of $1.5 million paid to the manager, the total cost of the acquisition will be $153.4 million.
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To fund the acquisition, the manager intends to use internal resources, divestment returns, and existing debt facilities, as mentioned in their press release issued on December 17. DHL USA has agreed to enter into a long-term leaseback agreement that will last until December 2035, with the option to renew for two additional five-year terms. This lease term of approximately 11 years includes a built-in rent escalation of 3.5% per annum, providing a steady stream of income and enhancing the resilience of CLAR’s portfolio.
The property is currently fully occupied and has a weighted average lease to expiry (WALE) of approximately 11 years, which will increase CLAR’s US portfolio WALE from 4.2 years to 4.7 years on a pro forma basis. The first-year net property income (NPI) yield for this acquisition is estimated to be about 7.6% before transaction costs and 7.4% after transaction costs. This is expected to have a positive impact on the distribution per unit (DPU) for the financial year ending December 31, 2023, with an approximate improvement of 0.019 Singapore cents or a DPU accretion of 0.1% if the acquisition was completed on January 1, 2023.
The property, which will be completed in 2022, is situated in Whiteland, a submarket in southeast Indianapolis, Indiana. This fully air-conditioned, single-storey logistics building has a gross floor area of 979,649 sq ft. This acquisition will result in a 35.3% increase in CLAR’s logistics assets under management (AUM) in the US, reaching approximately $587.5 million. With this addition, CLAR’s logistics presence in the US will expand to 20 properties across four cities, encompassing a total gross floor area of approximately 5.1 million sq ft.
Apart from the Indianapolis property, CLAR also has logistics properties in Kansas City, Chicago, and Charleston in the US. William Tay, executive director and CEO of the manager, stated that “DHL Indianapolis Logistics Center is a perfect fit with our current portfolio… This is CLAR’s first sale and leaseback acquisition in the US, and with this Class A logistics property, modern logistics assets will account for 42.3% of our US logistics assets under management. With the long-term lease agreement, this property will further enhance CLAR’s stable income stream, and we anticipate that the two new properties will contribute positively to our long-term returns.”