Ramping up logistics yields

• Initiate with Outperform and target price of S$1.23. Cache Logistics Trust is a REIT sponsored by CWT investing in income-producing logistics assets in Asia-Pacific. We value Cache using DDM valuation (discount rate 8.4%) and arrive a target price of S$1.23 which factors in S$220m of potential acquisitions. We believe it is reasonable to assume acquisitions given limited scope for organic growth via asset enhancement as the buildings are relatively new. Our target price offers a total prospective return of 45.1% from potential price upside of 39.2% and forward 2010 yield of 5.9% from its IPO price of S$0.88.

• Master leases ensure defensible income streams. Cache’s initial portfolio is leased back to its sponsor CWT with a triple net master lease structure. There is limited property expenses and capital expenditure for the REIT on such a structure. Cache’s weighted average lease expiry of 6.4 years is significantly longer than the industrial REIT average of 4.8 years.

• Pure Singapore logistics play for now. Cache is likely to acquire assets from its sponsor CWT, and from C&P in the short term. Staying Singapore-centric will give it significant edge over its closest peer MapleLog which is subject to higher country risk with a geographically diversified portfolio. The IPO price of S$0.88 prices Cache at book value. At this level, Cache’s annualised yield of 8.8% looks highly attractive against the SREIT sector (0.9 P/BV, 6.8% yield); and its industrial peers AREIT (1.2x P/BV, 6.7% yield ), and MapleLog (at book value, 6.7% yield).

Extracts from SGX,

Based on the 474,108,000 Units under the Offering, the valid applications received under the Public Offer as at the close of the Public Offer, the aggregate indications of interest received under the Placement as at the close of the book building exercise and the close of the Reserved Tranche, the Offering is approximately 7.8 times subscribed.

Source : SGX

Cache Logistics Trust IPO to raise $417m

Reit’s cornerstone investors are JF Asset Mgt and Morgan Stanley Investment Mgt

CACHE Logistics Trust (CLT), the first real estate investment trust (Reit) heading for a Singapore listing since the global financial crisis broke, aims to raise $417.2 million in gross proceeds from its listing.

CLT will offer 474.1 million units at 88 cents each – a price that is at the top end of the 84-88 cent range indicated earlier.

Of these units, 433.1 million will be placed out and 41 million will be available to the public. The public offer will open today and close on April 8.

According to Reit manager ARA-CWT Trust Management (Cache), investors at roadshows have responded well to the initial public offering.

‘I think it will be very successful,’ said ARA Asset Management CEO John Lim at a briefing yesterday. ARA has a 60 per cent stake in the manager while logistics firm and Reit sponsor CWT Ltd owns the other 40 per cent.

CLT has attracted two cornerstone investors – JF Asset Management holding 41 million units and Morgan Stanley Investment Management Company holding 15.9 million units.

After the IPO is complete, 632.2 million units will be in issue. Trading of the units is expected to start on April 12.

Based on the offer price of 88 cents, CLT is projecting a distribution yield of 8.7 per cent for the financial year ending Dec 31, 2010, and a yield of 8.82 per cent for 2011.

CLT’s initial portfolio will comprise six logistics properties in Singapore with a total gross floor area (GFA) of 3.9 million sq ft. Growth is on the cards – the Reit will focus on expanding locally in the near term before looking at acquisitions in foreign markets such as Greater China and Malaysia.

‘We need to make certain that we have a good base…and we also want to make sure that the timing is right to enter (overseas) markets,’ said CEO of CLT’s manager, Daniel Cerf.

Besides, CLT has a right of first refusal from CWT and its substantial shareholder C&P, on 13 properties with a GFA of 2.9 million sq ft. ‘You have to eat whatever you have on your plate first,’ Mr Lim quipped.

CLT will start off with an aggregate leverage of 25.9 per cent – one of the lowest levels in the Reit industry. According to Mr Cerf, leverage that is 30 per cent or less would be optimal, though the level may change as CLT acquires properties.

Cache Logistics Trust expects to raise S$417.2m from its IPO

Cache Logistics Trust expects to raise some S$417 million from its initial public offering.

The IPO, launched on Thursday, is the first logistics real estate investment trust to be listed in more than two years.

CLT is a joint real estate investment unit of CWT and ARA Asset Management.

It's offering more than 470 million units at 88 cents each.

The IPO is priced at the higher end of the 84 cents to 88 cents indicative range but Mr John Lim, chief executive officer of ARA Asset Management said that he remains confident that it will still attract "overwhelming demand."

There are currently six properties in CLT's portfolio.

They are located near Changi Airport, PSA Corp's terminals and Jurong Port.

With a total gross floor area of 3.9 million square feet, the properties include ramp-up warehouses – a multi-storey feature that CLT's chief executive officer Daniel Cerf believes will maximise plot ratio and boost its resilience as a logistics REIT.

Earlier this year, CWT sold two properties in Singapore to CLT for S$445 million, with the REIT funding the purchase through a combination of shares and cash.

CLT plans to use its IPO proceeds to fund new properties and working income.

The units are expected to start trading on the Singapore Exchange mainboard on April 12.

Macquarie Capital, Standard Chartered and DBS Bank are underwriters and joint global co-ordinators of the IPO. – CNA/vm

Link : IPO Prospectus

New Reit hoping to raise $400m

Cache Logistics Trust prospectus says 474.2m units will be offered at 84-88 cents each

CACHE Logistics Trust has lodged its listing prospectus with the Monetary Authority of Singapore, revealing that the new Reit hopes to raise about $400 million through its IPO.

According to the prospectus, Cache is offering 474.2 million units at 84 to 88 cents each.

A distribution yield in the range of 8.82-9.08 per cent has been forecast for 2011, depending on the issue price.

Cache is managed by ARA-CWT Trust Management (ACT) which is 60 per cent owned by ARA Asset Management Ltd and 40 per cent by CWT Ltd.

Daniel Cerf, formerly deputy chief executive of K-Reit Asia Management is ACT’s CEO. Mr Cerf, a licensed architect in the US, was previously general manager of special duties at Keppel Land.

Lim How Teck, who recently resigned as non-executive independent director of AIMS AMP Capital Industrial Reit Management, is ACT’s chairman and non-executive director.

Cache is a Singapore-based Reit and will principally invest in logistics properties in the Asia-Pacific as well as real estate-related assets.

Its initial portfolio of properties consists of six logistics warehouse properties in Singapore with an aggregate gross floor area (GFA) of 3.86 million square feet and a value of about $730 million.

The properties are CWT Commodity Hub, CWT Cold Hub, Schenker Megahub, C&P Changi Districentre, Hi-Speed Logistics Centre and C&P Changi Districentre. The properties are part of a sale and leaseback agreement entered by Cache with CWT and C&P Holdings respectively.

According to the prospectus, the initial portfolio is 94.1 per cent occupied by and contracted to 262 end-users comprising domestic and international companies.

The largest end-user accounts for 16.1 per cent of the total GFA of the initial portfolio. The top five end-users together account for 56.5 per cent of the occupied GFA.

CWT and C&P Holdings are the master lessees for these properties. Of the occupied GFA, 79.1 per cent is occupied by direct counterparties of the master lessees being third-party logistics service providers and third-party end-users.

The remaining 20.9 per cent of the occupied GFA is contracted from the master lessees by CWT related entities, which has in turn been fully contracted for use by third-party end-users.

C&P Holdings is a significant shareholder of CWT with a stake of 35.9 per cent.

The master lease agreements provide for lease durations ranging from five to 10 years and a weighted average lease expiry of 6.4 years, with locked-in annual rental escalations and a triple net lease structure for the first five years of the initial contracted lease term.

CWT and C&P has granted right of first refusal to Cache, providing the Reit with access to future acquisition opportunities. As at Dec 31, 2009, there are 11 properties totalling 2.3 million sq ft of GFA currently owned by CWT in Singapore, China and Vietnam and two income-producing properties totalling over 723,651 sq ft of GFA currently owned by C&P in Singapore of which Cache has first right of refusal.