Singapore-listed real estate investment trust CapitaLand Ascendas REIT (CLAR) has announced its plans to acquire DHL Indianapolis Logistics Center, a high-quality logistics property, from Exel Inc. d/b/a DHL Supply Chain (DHL USA) for $150.3 million. This proposed acquisition represents a 4.1% discount to the independent market valuation of the property as at Jan 1, 2025.
After factoring in transaction-related fees and expenses of $1.7 million, as well as a $1.5 million acquisition fee paid to the manager, the total acquisition cost is expected to be $153.4 million. To finance this, the manager intends to use a combination of internal resources, divestment proceeds, and/or existing debt facilities, according to a Dec 17 press release.
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Following the completion of the acquisition, DHL USA will enter into a long-term leaseback agreement for the entire gross floor area (GFA) of the property until December 2035, with options to renew for two additional five-year terms. The lease term of approximately 11 years, with a built-in rent escalation of 3.5% per annum, is expected to provide income stability and strengthen the resilience of CLAR’s portfolio, according to the manager.
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The property, which is fully occupied, has a weighted average lease to expiry (WALE) of approximately 11 years. This 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 of the proposed acquisition is approximately 7.6% pre-transaction costs and 7.4% post-transaction costs. On a pro forma basis, the impact on the distribution per unit (DPU) for the financial year ended Dec 31, 2023, is expected to be an improvement of approximately 0.019 Singapore cents, or a DPU accretion of 0.1%, assuming the proposed acquisition was completed on Jan 1, 2023.
The property, which was completed in 2022, is located in Whiteland, a submarket in southeast Indianapolis, Indiana. It is a fully air-conditioned, single-storey logistics building with a GFA of 979,649 sq ft.
This acquisition will increase the value of CLAR’s logistics assets under management (AUM) in the US by 35.3%, to approximately $587.5 million. With the addition of this property, CLAR’s logistics footprint in the US will expand to 20 properties across four cities, with a total GFA of approximately 5.1 million sq ft.
In addition to the Indianapolis property, CLAR’s logistics assets in the US are located in Kansas City, Chicago, and Charleston.
William Tay, executive director and CEO of the manager, says: “DHL Indianapolis Logistics Center is a strategic fit with our existing portfolio… This is CLAR’s first sale and leaseback acquisition in the US, and including this Class A logistics property, modern logistics assets will account for 42.3% of our US logistics assets under management. With the long lease in place, this property will further enhance CLAR’s resilient income stream, and we expect the two new properties to contribute positively to our long-term returns.”