Cambridge Industrial Trust acquires 128 Joo Seng Road for S$10.0 million

9th April 2007, Singapore – Cambridge Industrial Trust (“CIT”) announced that it has signed a Put and Call Option Agreement to acquire 128 Joo Seng Road (the “Property”) for S$10.0 million. The acquisition which is funded entirely by the existing debt facility, will be accretive to CIT’s distributable income.

Mr Wilson Ang, Chief Executive Officer of the Manager, said, “The Joo Seng and MacPherson industrial area is considered one of the prime central locations in Singapore for industrial occupiers. With the acquisition of 128 Joo Seng Road, we will further increase our presence in the prime Joo Seng-MacPherson industrial district. Due to the current limited supply of office space, we expect some spill over effect as office occupiers migrate to industrial spaces as alternatives for their backroom operations. In addition to this, with the upcoming Circle Line and the new Kallang/Paya Lebar Expressway, we believe that building an increasing presence in this location will further enhance CIT’s portfolio.”

General Description of the Property

Completed circa 1994, the 7-storey light industrial building sits on a land area of 3,451.8 square metres and has a gross floor area of 8,519.64 square metres. The Property has a long land lease duration of 30 years with effect from 1 May 1992, with a confirmed option for a further term of 30 years. Located at the junction of Joo Seng Road and Kampong Ampat, it is approximately 10 km away from the city centre at Collyer Quay and is in close proximity to the upcoming Tai Seng (Circle Line) MRT station. The Property is also easily accessible via the Pan Island Expressway and the upcoming Kallang/Paya Lebar Expressway.

Upon completion of the Sale and Purchase, Seng Huat Packaging Pte Ltd (“Seng Huat”) will leaseback the Property for a 7-year term with an option to renew for a further term of 3 years. The rental escalation is 5% on the commencement of the third and fifth year. Seng Huat will bear the cost of maintenance of the Property.

Cambridge Industrial Trust (“CIT”) is the first independent industrial real estate investment trust (REIT) in Singapore, established with the objective of investing directly or indirectly in income-producing real estate related assets, which are used mainly for industrial (including warehousing) purposes. CIT’s initial portfolio comprised 27 properties, which are all located in Singapore. CIT’s key financial objectives are to deliver stable and regular distributions to unitholders, in addition to long-term growth in distribution per unit, by acquiring high yielding properties both locally and overseas.

Diverse Industrial Portfolio. CIT’s initial portfolio comprised 27 properties with approximately 426,725 sq m of lettable area. Majority of the properties are located close to current and future transport infrastructure and designed with building specification that can cater to a wide range of tenant mix. As at Dec 06, the total appraised value of the whole portfolio amounted to S$531m, leading to an annualised gross revenue for FY06A of S$43.2m. All the leases of the properties are structured under a built-in rental escalation model, providing a stable income rise for CIT. The weighted average term of the leases by acquisition value for the properties is approximately 7.9 years.

Positive Industrial Outlook. According to Urban Redevelopment Authority (URA), prices of multiple-user factory space increased by 6.8% and rentals increased by 4.1% for 2006. In addition, occupancy rates improved to 90%. We expect to continue to see more rental and capital growth in the industrial sector. Currently, Singapore has rises to the 20th position in industrial space cost- six places higher than last year.This is due to the strong manufacturing sector as well as the spillover effect from the surging office market. The timing of CIT’s acquisitions is well planned with the upturn of the industrial market. The recent acquistions done after IPO are focused on light industrial buildings. We expect the current high rental rate in the commerical sector to divert some attention to light industrial sector. Moreover, we view the rental escalation model structured into the long leases of CIT positively, due to the expected stability in rental rate .

First independent industrial REIT. Both CIT and its manager are not controlled by or dependent on any property developer. CIT will be viewed more positively when it approaches property owners who are also property developers, as they would not be perceived as being in competition with the property owner’s property related development businesses. Moreover, some of the property owners themselves will become unitholders as well as tenants of CIT. This aligned interest creates advantages and flexibility for CIT to access a large pool of potential properties located locally or overseas.

Stable and high distribution. At the current share price of S$0.81, our forecasted annual yield is 6.8% and 7.5% for FY07 and FY08 respectively. This is much higher than the Singapore REITs average yield. FY07F yield represents a healthy spread of 3.73% as compared to a risk free rate of 3.07% (Singapore 10-year bond as of 12 March 2007), and is above the market average spread of 1.10%. Compared to the other listed REITs in Singapore as well as other major REITs markets, CIT REIT offers an attractive risk adjusted investment with high distribution.

Valuation. Using Dividend Discount Model (DDM), our derived fair value for CIT is S$0.95. This translates to a 5.7% yield and a price to net asset value of 1.43x for FY07F. In our relative comparison, our fair value is above the average S-REITs/industrial yield and below the average price to net asset value. At the current price of S$0.81, we recommend a Buy for CIT with a 18% return.

Undervalued S-REIT industrial play