CapitaLand Ascendas REIT (CLAR) has announced plans to acquire the DHL Indianapolis Logistics Center, a prime Class A logistics property, from Exel Inc. d/b/a DHL Supply Chain (DHL USA) for $150.3 million. This is a 4.1% discount to the independent market valuation of the property as of January 1, 2025.
After taking into account 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 will amount to $153.4 million. The manager intends to fund the acquisition cost through a mix of internal resources, divestment proceeds, and/or existing debt facilities, according to a press release issued on December 17.
Upon completion of the acquisition, DHL USA will enter into a long-term leaseback agreement until December 2035 covering the entire gross floor area (GFA) of the property, 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, will provide income stability and strengthen the resilience of CLAR’s portfolio, according to the manager.
This fully occupied property, with a weighted average lease to expiry (WALE) of around 11 years, will increase CLAR’s portfolio WALE in the US from 4.2 years to 4.7 years on a pro forma basis.
Based on the proposed acquisition, the first-year net property income (NPI) yield is approximately 7.6% pre-transaction costs and 7.4% post-transaction costs. The estimated impact on the distribution per unit (DPU) for the financial year ended December 31, 2023 is expected to be an improvement of around 0.019 Singapore cents, or a DPU accretion of 0.1%, assuming the completion of the acquisition on January 1, 2023.
The property, which is expected to be completed in 2022, is located in Whiteland, Indianapolis, Indiana. It is a fully air-conditioned, single-storey logistics building with a GFA of 979,649 square feet. The acquisition will boost the value of CLAR’s logistics assets under management (AUM) in the US by 35.3% to approximately $587.5 million. With this acquisition, CLAR’s logistics footprint in the US will expand to 20 properties across four cities with a total GFA of approximately 5.1 million square feet.
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William Tay, executive director and CEO of the manager, said, “The 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.”
In addition to this latest property in Indianapolis, CLAR’s logistics assets in the US are located in Kansas City, Chicago, and Charleston.