CapitaLand Ascendas REIT (CLAR) has announced plans to acquire the DHL Indianapolis Logistics Center, a highly sought-after Class A logistics property, from DHL Supply Chain (DHL USA) for $150.3 million. This purchase price represents a 4.1% discount to the independent market valuation of the property as of January 1, 2025.
In addition to the acquisition cost, the REIT will also incur transaction-related fees and expenses of $1.7 million, as well as pay a $1.5 million acquisition fee to the manager. After factoring in these costs, the total outlay for the property will be $153.4 million.
Funding for the acquisition will come from a combination of internal resources, divestment proceeds, and/or existing debt facilities, as outlined in a press release issued on December 17.
As part of the deal, DHL USA will lease back the entire gross floor area (GFA) of the property under a long-term agreement until December 2035, with options to renew for two additional five-year terms. This long lease term, combined with built-in rent escalation of 3.5% per annum, will provide stable income and bolster the resilience of CLAR’s portfolio, according to the manager.
The fully occupied property 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.
Based on the first-year net property income (NPI) yield, the proposed acquisition will generate a pre-transaction cost yield of approximately 7.6%, and a post-transaction cost yield of 7.4%. This is expected to have a positive impact on the distribution per unit (DPU) for the financial year ending December 31, 2023, with an estimated DPU accretion of 0.1%, or an improvement of approximately 0.019 Singapore cents, assuming the acquisition is completed on January 1, 2023.
The property, located in Whiteland, a submarket in southeast Indianapolis, Indiana, is a state-of-the-art, fully air-conditioned, single-storey logistics building with a GFA of 979,649 sq ft. It is expected to be completed in 2022.
Upon completion of the acquisition, CLAR’s logistics assets under management (AUM) in the US will increase by 35.3% to approximately $587.5 million. The acquisition will also expand CLAR’s logistics footprint in the US to 20 properties across four cities, with a total GFA of approximately 5.1 million sq ft.
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In addition to the DHL Indianapolis Logistics Center, CLAR’s logistics assets in the US are located in Kansas City, Chicago, and Charleston.
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William Tay, Executive Director and CEO of the manager, stated, “DHL Indianapolis Logistics Center is a strategic addition to our existing portfolio… This is CLAR’s first sale and leaseback acquisition in the US, and together with this Class A logistics property, modern logistics assets will account for 42.3% of our US logistics assets under management. With a long lease in place, this property will further enhance CLAR’s sustainable income stream, and we expect the two new properties to contribute positively to our long-term returns.”