Cambridge – DMG

New acquisition

Acquisition of 16 Tai Seng Street. The management of Cambridge Industrial Trust (CIT) just announced the acquisition of the property at 16 Tai Seng Street for a purchase consideration of S$59.25m. 16 Tai Seng Street is a purpose built, contemporary, with a current gross floor area of approximately 16,282 square metres. On completion of the acquisition of the property (2Q12), CIT will lease back the property to the seller for a period of six years. This acquisitions, which is expected to bring in an additional dividend of 0.16S¢, will be funded through a combination of 40% debt from the Acquisition Term Loan Facility and 60% cash from the net proceeds from the Medium Term Note (the “MTN”) Issuance. We maintain our BUY call with a DDM-based TP S$0.605.

Well located, purpose built industrial property. 16 Tai Seng Street is a purpose built, contemporary, five storey industrial building with an ancillary showroom, with a current gross floor area of approximately 16,282 square metres. Located in the central part of Singapore, it is near to the Tai Seng MRT station and easily accessible by the Central Expressway as well as the Pan Island Expressway. 16 Tai Seng Street is a JTC leasehold estate of 30+30 years tenure commencing from 4 July 2007.

Further extension of property by seller. In addition, the seller will be undertaking alterations and additions (A&A) to construct additional floors which will increase the gross floor area of the subject property from approximately 16,282 square metres to approximately 19,878 square metres. Upon completion, a further sum of S$13.08m will be paid for the extension on the property. The A&A Works are expected to be completed within 12 months (2Q13) from the date of completion of the acquisition.

Positive view on acquisition. We view this acquisition positively as the company is able to gain a spread of 2% (4.5% interest rate incurred due to MTN and term loan vs an average cap rate of 6.5%) through this action with no dilution to shareholders’ equity. We maintain our BUY call with a TP of S$0.605.