ARA to fully acquire Cache's Reit, property managers in deal with CWT

Singapore

ARA Asset Management (ARA) has agreed to acquire all the shares that it does not already own in the Reit manager and property manager of Cache Logistics Trust (Cache) - the third time an industrial Reit manager may be changing hands in recent years.

While this will end the sponsor-Reit relationship between global logistics player CWT and Cache, analysts believe the network of ARA in the region may far outweigh the benefits of having pipeline acquisition assets from CWT.

CWT currently owns 40 per cent of the issued shares of the Reit manager, ARA-CWT Trust Management (Cache) Limited, and 60 per cent of the issued shares in the property manager, Cache Property Management Pte Ltd.

ARA is acquiring these stakes through two separate wholly-owned subsidiaries, which inked the share purchase agreements (SPA) with CWT. The pricing details are not disclosable.

Following the completion of the acquisitions likely on July 2, ARA will hold 100 per cent of the Reit manager and the property manager.

ARA group CEO John Lim told The Business Times: "ARA is already the controlling manager for Cache so when CWT wanted to sell its stake, it was only natural for us to buy it. Cache is the only logistics Reit directly managed by ARA and it forms a strategic part of ARA's integrated multi-product global fund management platform.

"With our strong foothold in Asia-Pacific and extensive experience in managing Reits, we are confident that exercising our full management control over Cache represents a greater alignment of interest which will be beneficial to unitholders in the long term," he added.

As CWT will no longer hold any shares in the Reit manager, the right of first refusal (ROFR) granted by CWT to Cache would also expire at such point in time.

But observers note that even though Cache has had ROFR for 11 assets from CWT, only two assets - Pandan Logistics Hub in Singapore and Jinshan Chemical Warehouse in China - have been acquired from CWT since its listing in 2010.

Cache has also embarked on a portfolio rebalancing and growth strategy in recent years in tandem with ARA's expanding presence in the region, picking up a logistics warehouse in Australia for the first time in early 2015. Since then, Cache acquired a total of 16 warehouses through third-party opportunities; its Australian properties now make up close to 30 per cent of its total portfolio valuation and outnumber its Singapore portfolio in the first quarter of 2018.

As part of its rebalancing strategy, it has divested three properties in Singapore in the last three years. Cache has grown from about S$730 million at its 2010 listing to over S$1.4 billion as at March 31, 2018, mainly through third-party acquisitions.

"While investors might frown upon the lack of an available pipeline, we believe that given ARA's vast network and resources in the Asia-Pacific (particularly in Australia, where Cache has been growing its exposure), the merits of ARA's consolidated interest in Cache could outweigh the benefits of a visible ROFR pipeline," said DBS Group Research.

JPMorgan analyst Brandon Lee noted that this third sale of an industrial Reit manager within two years "signifies another major milestone in the industrial S-Reit sector". Assuming similar valuation multiples as Viva Industrial Trust's Reit manager, which is being acquired by ESR-Reit manager for S$62 million as part of the scheme of arrangement to merge Viva and ESR-Reit, ARA's purchase consideration for Cache's Reit manager is estimated at S$20-25 million.

One other analyst felt that though both ARA and e-Shang Redwood Group have the backing of Warburg Pincus as a major shareholder, it "may not be an imminent plan" for Cache to be merged with industrial Reits sponsored by e-Shang Redwood. But one cannot rule this out as a potential long-term plan too, said the analyst who declined to be named.

But as far as ARA is concerned, Mr Lim said: "We do not think it is appropriate to comment on behalf of Warburg Pincus." For now, ARA's move to consolidate its interest and decision-making in Cache is still significant, nonetheless. Daniel Cerf, CEO of the Reit manager, said: "We will continue to tap on ARA's expanded network and resources in the Asia-Pacific to further the growth of the Reit and its earnings."

Cache's recent investment focus has been within Australia, but the manager continues to keep a look-out for opportunities in Singapore as well as Korea and Japan, the Reit manager said.

ARA, which manages some S$77.2 billion in gross assets with its associates, has been accumulating stakes in the Reits it manages. For a few years now, ARA has not sold the units it has received via management fees from Cache. Likewise, it has subscribed for its pro-rata shares in the rights issue undertaken by Cache last year, Cache's Reit manager added.