Deal is set at S$55.2m.
Cache Logistics Trust announced that they have signed an option to purchase Precise Two Building (along 15 Gul Way) for S$55.2m (inclusive of upfront land premium of S$6.15m).
According to DBS, the property is a newly completed three-storey ramp-up warehouse of c284k sqft GFA and sits on a land with a 30 year tenure starting Oct’03.
The vendor is Precise Development Pte Ltd, who will lease back the property for a 6 year term, with an option for a further 6 years. The completion of this deal is subject to JTC Corporation approval.
High initial yield of 8.7%. While the initial yield of 8.7% is high, we believe that it compensates for the shorter land lease tenure of c20 years. It is also noted to be higher than Cache’s implied yields of c6.5%, which means that the acquisition will be accretive to earnings. With this acquisition, Cache will benefit from a larger and more diversified portfolio of warehouses in Singapore.
Moody’s rating obtained; improved financial flexibility. Cache also announced that they have obtained the long anticipated Baa3 rating from Moody’s.
Given a visible acquisition pipeline from its sponsor, the credit rating will provide the trust with added financial capacity and flexibility to head above the current 35% limit.
BUY, TPS$1.40. The acquisition forms c26% of our forecasted S$200m in acquisitions. Further re-rating catalyst hinges on the manager executing on more accretive acquisitions. Stock offers FY13-14F yied of c7.0%
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