ESR-Logos Reit proposes acquisition of logistics asset in Tokyo for S$183.5m
Nisha Ramchandani
ESR-LOGOS Reit (E-LOG) is planning to acquire a 5-storey modern logistics asset in Tokyo for 17.8 billion yen or S$183.5 million (inclusive of rental support), which is expected to be distribution per unit (DPU) accretive to unitholders.
The transaction is the first direct asset acquisition, post the merger with ARA Logos Logistics Trust, from sponsor ESR Group’s pipeline of logistics assets. Including fees and expenses, the total acquisition cost is about S$187 million.
Located in Sakura City, Chiba Prefecture, the freehold asset has a total land area of 41,658 square metres (sq m), net lettable area of 81,507 sq m and a weighted average lease expiry (WALE) of 2.9 years, as at Jun 30, 2022. ESR Sakura DC will be acquired at a net property income yield of 4.35 per cent.
The acquisition is expected to be DPU accretive to unitholders on a pro forma basis, assuming the acquisition was completed on Jan 1, 2021. DPU would increase by 2.9 per cent if it is 100 per cent funded by debt, and by 0.5 per cent, if it is 60 per cent funded by debt and 40 per cent equity funded. As at Jul 12, 2022, the Reit’s manager has received committed debt financing term sheets of up to 17.6 billion yen from banks to fund the proposed acquisition.
Adrian Chui, chief executive officer of the Reit’s manager said: “We are pleased to expand the Reit’s footprint into Japan, our second overseas market, with the acquisition of ESR Sakura DC, a freehold asset that will ride on the strong logistics growth trends in the Greater Tokyo area.”
The acquisition constitutes an “interested person transaction” and will be put to a vote by unitholders at an upcoming extraordinary general meeting (EGM).
To secure the deal for E-LOG, ESR Group will backstop E-LOG’s risk of forfeiting the deposit of 872.5 million yen (approximately S$9 million), which is payable upon signing of the sale and purchase agreement, should unitholders not approve the acquisition at the EGM. In addition, ESR Group will provide 12 months of rental support to mitigate leasing risks, amounting to 236.5 million yen.
Units in E-LOG closed at 41 Singapore cents on Monday (Aug 29), down half a cent or 1.21 per cent.
