ARA Logos to divest Kidman Park in Australia for A$41.5m

Singapore

ARA Logos Logistics Trust (ARA Logos) on Sunday entered into an agreement with 1835 Capital, a South Australian based property developer and investor, to divest a property located at 404-450 Findon Road, Kidman Park, Australia for A$41.5 million (S$42.6 million).

The proposed sale consideration is nearly 3.8 per cent above the property's A$40 million valuation as at Dec 31, which was done by CBRE.

After taking into account the associated taxes and expenses, net proceeds from the sale would be about A$40.5 million, with an estimated divestment gain of about A$400,000 over the latest book value, as at Dec 31,2020.

The proceeds may go towards funding new acquisitions, repaying debt and working capital, the manager said in a bourse filing on Monday.

This is ARA Logos' second proposed divestment announcement in less than a week. On Thursday the trust entered into an agreement with local agri-food company PGI Holdings to divest ALOG Changi DistriCentre 2 for S$16.7 million.

According to ARA Logos, the deal is in line with its strategy to build a more resilient portfolio. It has been selectively divesting "lower-performing" properties with "limited growth potential" over the past few years.

Completed in 1964 and added to ARA Logos' portfolio in 2015, the Kidman Park property is freehold, with a total land area of 119,170 square metres (sq m) and a gross floor area of 58,795 sq m. It comprises a cold store warehouse space with ancillary offices.

The proposed divestment is classified under disclosable transactions but is not subject to unitholders' approval. It is expected to be completed by H1 2021.

On Friday, CGS-CIMB increased its target price on ARA Logos to S$0.814, up from S$0.745 previously.

The brokerage noted that ARA Logos' Changi DistriCentre 2 divestment and recently completed LP Property acquisition have made the trust a "more diversified" real estate investment trust with "stronger growth prospects". These portfolio changes also resulted in a roughly equal division of ARA Logos' assets under management (AUM) in Singapore and Australia, though the just announced Kidman Park divestment will tilt the portfolio away from Australia.

CGS-CIMB's report came after ARA Logos posted an 8.2 per cent year-on-year rise in revenue to S$31.1 million for Q1 2021. Net property income was up 8.7 per cent to S$23.9 million.

The Reit's distribution per unit for the quarter was 1.353 cents, up 35.7 per cent.

The brokerage noted that ARA Logos' occupancy rate has improved from 98.5 per cent last year to 99.1 per cent in Q1 2021. The trust said it expects to renew expiring leases at largely unchanged rents.

CGS-CIMB has maintained its DPU forecasts for 2021 to 2023, but reduced its estimated cost of equity from 7.7 per cent to 7.4 per cent.

CGS-CIMB also highlighted that the stock offers an "attractive" dividend yield of 7 per cent while reiterating its "add" call.

Units in ARA Logos closed at 76.5 Singapore cents on Monday, up 2 per cent.