DAIWA House Logistics Trust (DHLT) has entered into an agreement to acquire a freehold two-storey warehouse in Japan for 2.6 billion yen (S$24.1 million) from its sponsor, Daiwa House Industry.

The purchase consideration is 18.1 per cent lower than the average of two independent valuations of the property – which was at S$29.4 million – and the move shows support from the sponsor, said the manager in a bourse filing on Wednesday (Jan 31). 

The warehouse, DPL Ibaraki Yuki, is located in Yuki-shi in Ibaraki prefecture in Japan, approximately 100 km from central Tokyo. There are a few industrial parks established in the city where factories and distribution bases of major companies are located.

The multi-tenanted property has a net lettable area of 13,421 sq m and a 100 per cent occupancy rate. The entire property is leased to listed food products wholesaler Mitsubishi Shokuhin, an existing tenant in DHLT’s portfolio. The lease term for the building is four years from Feb 1, 2023.

The warehouse is located in a hub for food and machinery factories, with food processing factories concentrated in the neighbouring city of Chikusei.

As the property is easily accessible via highways, it may be used to serve as a regional distribution base for areas such as Oyama and Utsunomiya cities, said the manager. The warehouse is also connected to a wider region covering the Tohoku and Tokyo areas via the Tohoku Expressway.

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In addition to the purchase consideration, the total acquisition cost also includes an acquisition fee, payable to the manager, of S$240,000, a refundable consumption tax of approximately S$1.9 million as well as debt-related costs, professional and other fees and expenses of approximately S$1.9 million.

This brings the total acquisition cost to approximately S$28.1 million.

The transaction will be financed through external debt financing, while the acquisition fee will be paid through the issue of units in DHLT. The deal is expected to be completed in the first quarter of 2024.

The manager of DHLT expects the acquisition to be accretive to the real estate investment trust’s (Reit) portfolio and improve returns to unitholders. It will also allow DHLT to strengthen its foothold in a market with “sound fundamentals over the long term”.

This is because demand for Japan logistics properties continue to be supported by e-commerce and third-party logistics sectors, said the manager.

Said Jun Yamamura, chief executive officer of DHLT’s manager: “With this acquisition, DHLT will add to its portfolio a newly completed freehold property that is anchored by a blue-chip tenant.”

“The accretive acquisition demonstrates our commitment to continually drive the growth of DHLT and improve returns to unitholders,” he said. “We will continue to explore opportunities to improve the DHLT portfolio while maintaining prudent capital management.”

Units of DHLT closed S$0.005 or 0.8 per cent higher at S$0.645 on Wednesday, before the announcement.