CapitaLand Ascendas REIT (CLAR) has announced that it intends to purchase the DHL Indianapolis Logistics Center, a high-quality Class A logistics property, from Exel Inc. d/b/a DHL Supply Chain (DHL USA) for a total of $150.3 million. This proposed acquisition represents a 4.1% discount to the independent market valuation of the property as of January 1, 2025. After factoring in transaction-related fees and expenses of $1.7 million, as well as a $1.5 million acquisition fee to the manager, the total cost of acquisition will be $153.4 million.
According to a press release issued on December 17, the manager plans to finance the total cost of acquisition through a combination of internal resources, divestment proceeds, and/or existing debt facilities. Upon completion of the acquisition, DHL USA will sign a long-term lease until December 2035 for the entire gross floor area of the property, with options to renew for two additional five-year terms. The long 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.
Currently fully occupied, the property has a weighted average lease to expiry (WALE) of around 11 years, which 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. The pro forma impact on the distribution per unit (DPU) for the financial year ended December 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 is completed on January 1, 2023.
The property, which was completed in 2022, is situated in Whiteland, a submarket of southeast Indianapolis, Indiana. It is a fully air-conditioned, single-storey logistics building with a gross floor area of 979,649 square feet. Through this acquisition, the value of CLAR’s logistics assets under management (AUM) in the US will increase by 35.3% to approximately $587.5 million. This will also expand CLAR’s logistics footprint in the US to 20 properties across four cities, with a total gross floor area of about 5.1 million square feet.
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Apart from this latest property in Indianapolis, CLAR’s logistics assets in the US are located in Kansas City, Chicago, and Charleston. William Tay, executive director and CEO of the manager, stated, “DHL Indianapolis Logistics Center is a strategic fit with our existing portfolio… This will be CLAR’s first sale and leaseback acquisition in the US, and will bring the proportion of modern logistics assets in our US portfolio to 42.3%. With a long lease in place, this property will further enhance CLAR’s resilient income stream, and we anticipate that the two new properties will contribute positively to our long-term returns.”