Singapore-based real estate investment trust (REIT) CapitaLand Ascendas REIT (CLAR) has announced its intention to acquire DHL Indianapolis Logistics Center, a Class A logistics property, from Exel Inc. d/b/a DHL Supply Chain (DHL USA) for $150.3 million. This purchase represents a 4.1% discount to the independent market valuation of the property as of Jan 1, 2025. After including transaction-related fees and expenses of $1.7 million, and an acquisition fee of $1.5 million paid to the manager, the total cost of the acquisition will be $153.4 million. To finance this purchase, the manager plans to use a combination of internal resources, divestment proceeds, and/or existing debt facilities, according to a press release issued on December 17th.
Under the terms of the deal, DHL USA will enter into a long-term leaseback agreement for the property’s entire gross floor area until December 2035, with options to renew for two additional five-year terms. This long lease term, with a built-in rent escalation of 3.5% per annum, is expected to provide income stability and strengthen the resilience of CLAR’s portfolio. With a weighted average lease to expiry (WALE) of approximately 11 years, the fully occupied property will also increase CLAR’s US portfolio WALE from 4.2 years to 4.7 years on a pro forma basis.
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The first-year net property income (NPI) yield of the proposed acquisition stands at around 7.6% pre-transaction costs and 7.4% post-transaction costs. As a result, it is expected to have a positive impact on the distribution per unit (DPU) for the financial year ended Dec 31, 2023, with an estimated improvement of approximately 0.019 Singapore cents, or a DPU accretion of 0.1%, assuming the acquisition was completed on Jan 1, 2023.
Located in Whiteland, a submarket in southeast Indianapolis, Indiana, the property was completed in 2022. It is a fully air-conditioned, single-storey logistics building with a gross floor area of 979,649 sq ft. This acquisition will increase the value of CLAR’s logistics assets under management (AUM) in the US by 35.3% to around $587.5 million. It will also expand CLAR’s logistics footprint in the US to 20 properties across four cities, with a total GFA of approximately 5.1 million sq ft. 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, said, “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, with the addition of 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.”