CLT – BT

Cache buys China warehouse for 71m yuan

CACHE Logistics Trust is buying a chemical warehouse facility in Shanghai for 71 million yuan (S$13.5 million), marking its entry into China.

The real estate investment trust (Reit) is purchasing the property from its sponsor CWT Ltd under an acquisition-and-leaseback arrangement. This is its first purchase of a CWT property since the trust’s listing in April last year.

CWT will leaseback the facility for a period of three years with an option for a further three years.

With a built-up gross floor area (GFA) of 13,547 square metres, the facility is located in the Jinshan District – which is situated within one of the largest petrochemical bases in Asia, the Shanghai Chemical Industrial Park (SCIP).

Risk and earnings diversifications were among reasons cited by Cache for the latest addition to its portfolio.

‘The acquisition will enable Cache to capitalise on the economic growth in the region and in particular, the resilient chemical and commodity logistics businesses.

‘Concurrently, by diversifying into a different market, Cache is expected to benefit from risk diversification from the property and the economic cycles where Cache’s portfolio is located,’ said Daniel Cerf, chief executive officer of Cache’s manager, ARA-CWT Trust Management Limited.

The management has guided that the transaction will be accretive at both net property income (NPI) and distribution per unit (DPU) levels.

The NPI yield of 8.6 per cent is one percentage point higher than Cache’s present portfolio yield of 7.6 per cent.

Likewise, after factoring in applicable taxes in China, FY2011 DPU is expected to see a boost of 0.03 cent per unit.

The Reit has guided that it will be keeping an ‘open eye’ for opportunistic acquisitions in the Asian region, with a special focus on China.

Mr Cerf said in an interview yesterday: ‘We believe wholeheartedly that the China market still has quite a lot of depth and good resilient growth especially on the logistics side.’

He added that cities of particular interest for Cache include tier-one types such as Beijing, Chengdu, Shanghai, and Tianjin, though he maintains that the Reit’s portfolio will likely continue to be predominantly Singapore- based.

Cache’s counter closed trading one cent higher at 94 cents yesterday.