Croesus Retail Trust acquires two Tokyo retail properties for S$176.3m

Acquisitions add "resilience and stability" to portfolio.

SGX-listed Croesus Retail Trust (CRT) announced that Croesus Retail Asset Management Pte. Ltd., in its capacity as trustee-manager of CRT, has entered into two sale and purchase agreements to acquire two retail properties in Tokyo, Japan – Luz Omori and NIS Wave I.

With the completion of the sale, DPU is expected to increase by 5.7% from 7.01 Singapore cents to 7.41 Singapore cents for the period from 1 July 2013 to 30 June 2014 (Forecast Year 2014).

The enlarged portfolio will comprise six retail properties, and expand CRT’s NLA by approximately 9% to 198,148 sqm and grow its portfolio value by approximately 28.3% to JPY67,830 million.

The closing date of the acquisitions shall be no later than 31 March 2014, unless otherwise agreed in writing by the relevant parties.

The total purchase consideration for the properties is JPY14,250 million (approximately SGD176.3 million), comprising JPY3,450 million (approximately SGD42.7 million) for Luz Omori and JPY10,800 million (approximately SGD133.6 million) for NIS Wave I.

The aggregate purchase consideration is at a 4.7% discount to the aggregate valuation of the Properties.

The acquisition of the two quality assets represents a strategic move that is yield-accretive to CRT.

"Luz Omori and NIS Wave I are two strategically-located retail properties in growing residential areas within Tokyo, which has excellent accessibility to major transportation nodes. The Properties’ high occupancy (97.2% and 100% respectively as at 31 December 2013), long weighted average lease expiry (WALE) (16.6 years and 4.8 years respectively as at 31 December 2013), diversified tenant base and strong competitive position will offer resilience and stability to the portfolio," the business trust said.

Commenting on the acquisitions, Mr. Jim Chang, Chief Executive Officer and Executive Director of Croesus Retail Asset Management Pte. Ltd., said, “We are very excited to close the acquisitions. These assets greatly complement our existing portfolio and represent tremendous opportunities to the growth of our portfolio in creating better returns to unitholders. Luz Omori and NIS Wave I will also strengthen our portfolio with their near-100% occupancy rates in cities with stable growth. The newly-acquired properties will also benefit from good connectivity and a sizeable catchment, and we can expect to recognise stable and sustainable rental income from these properties in the next financial quarter.”

Mr. Jeremy Yong, Co-Founder and Group Managing Director of Croesus Merchants International Pte. Ltd. (Sponsor of CRT) and Non-Executive Director of Croesus Retail Asset Management Pte. Ltd. said, “This marks the successful start of the first phase of acquisition growth for CRT. By its recent positive results announcement, and also by today’s acquisition announcement, the management team continues to systematically execute its plans for CRT that was articulated to unitholders at the IPO last year. With time, CRT and its management team will continue to grow from strength to strength. We thank all unitholders and stakeholders for their continued support of CRT.”

The sale and purchase agreements for the Properties were entered into through Persimmon TMK, a special purpose tokutei mokuteki kaisha (TMK) incorporated under Japan Law for investment holding purposes.

The Trustee-Manager will finance the acquisitions through a combination of: (i) net debt proceeds from new 5-year Japanese onshore debt of JPY8,300 million (approximately SGD102.7 million); and
(ii) proceeds of JPY6,128 million (approximately SGD75.8 million) from the issuance of the Notes pursuant to its U.S.$500,000,000 Euro Medium Term Note Programme established on 3 January 2014.

Here are more details on the acquired properties, Luz Omori and NIS Wave I:

Luz Omori is a family-oriented retail property situated in Ota Ward, the third most populous ward in Tokyo, with close to 700,000 residences. Luz Omori has 30 tenants anchored by brand names such as Docomo and Daiso, and caters to the neighbourhood that has seen a 13.7% increase in the number of households from 1993 to 2013. It is strategically located at the intersection of a traditional shopping street and a retail street with strong shopper traffic leading directly to the JR Omori Station, from which it takes approximately 17 minutes to reach Tokyo station. There is no direct competition for Luz Omori due to its unique tenant mix. In addition, there are currently no future retail development in the pipeline.
NIS Wave I is a retail property located in Tachikawa City – ranked the third most desirable city to live in for its quick access to central Tokyo.

With various leisure and F&B offerings, NIS Wave I is directly connected to JR Tachikawa Station. Due to Tachikawa Station’s growing importance as a transportation hub and new affordable residential developments in close proximity to the station, the city has seen a 16.4% increase in the number of households since 20014. No future supply of large-scale retail area in NIS Wave I’s catchment area is expected until 2015. The property is also poised to benefit from increased shopper footfall due to its proximity to the development pipeline.

The Properties are relatively new with building ages of approximately 2.9 and 6.5 years for Luz Omori and NIS Wave I respectively, compared to 6.0 years for the initial portfolio of CRT. This lowers the weighted average building age of CRT’s portfolio to 5.9 years post-acquisitions.

Luz Omori and NIS Wave I are acquired from Marubeni Corporation (a strategic partner of CRT) and Godo Kaisha Wave I, a third-party vendor respectively.