CapitaLand Ascendas REIT (CLAR) has announced its plans to acquire the DHL Indianapolis Logistics Center from Exel Inc., a subsidiary of DHL Supply Chain (DHL USA), for $150.3 million. This purchase represents a 4.1% discount to the property’s independent market valuation 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 for the manager, the total cost of the acquisition will be $153.4 million.
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According to a press release on December 17, the manager intends to fund this acquisition through a combination of internal resources, divestment proceeds, and existing debt facilities. Following the acquisition, DHL USA will enter into a long-term leaseback agreement for the entire gross floor area of the property until December 2035, with options to renew for two additional five-year terms. The long lease term of approximately 11 years, with built-in rent escalation of 3.5% per annum, will provide income stability and strengthen the resilience of CLAR’s portfolio.
The fully occupied property, with a weighted average lease to expiry (WALE) of approximately 11 years, 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 for the proposed acquisition is approximately 7.6% before transaction costs and 7.4% after transaction costs. This is expected to have a positive impact on the distribution per unit (DPU) for the financial year ended December 31, 2023, with an estimated improvement of 0.019 Singapore cents or a DPU accretion of 0.1%, assuming the acquisition is completed on January 1, 2023.
The property, located in Whiteland, Indiana, is a fully air-conditioned, single-storey logistics building with a gross floor area of 979,649 square feet. Upon its completion in 2022, the acquisition will increase the value of CLAR’s logistics assets under management (AUM) in the US by 35.3% to approximately $587.5 million. This will also expand CLAR’s logistics footprint in the US to a total of 20 properties across four cities, with a combined gross floor area of approximately 5.1 million square feet. Currently, 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 is CLAR’s first sale and leaseback acquisition in the US, and including this Class A logistics property, modern logistics assets will account for 42.3% of our US logistics assets under management. With the long lease in place, this property will further enhance CLAR’s resilient income stream, and we expect the two new properties to contribute positively to our long-term returns.”