Thursday 15 March 2012

Cambridge Industrial Trust

DMG & Partners Research on 14 Mar 2012

THE management of Cambridge Industrial Trust (CIT) has just announced the acquisition of the property at 16 Tai Seng Street for a purchase consideration of $59.25 million.

On completion of the acquisition of the property in Q2 2012, CIT will lease back the property to the seller for a period of six years.

This acquisition, which is expected to bring in an additional dividend of 0.16 cent, will be funded through a combination of 40 per cent debt from the Acquisition Term Loan Facility and 60 per cent cash from the net proceeds from the Medium Term Note (MTN) issuance.

16 Tai Seng Street is a purpose-built, contemporary, five-storey industrial building with an ancillary showroom, with a current gross floor area of approximately 16,282 square metres.

Located in the central part of Singapore, it is near the Tai Seng MRT station and is easily accessible by the Central Expressway as well as the Pan Island Expressway.

16 Tai Seng Street is a JTC leasehold estate of 30+30 years' tenure commencing from July 4, 2007.
In addition, the seller will be undertaking alterations and additions (A&A) to construct additional floors, which will increase the gross floor area of the subject property from approximately 16,282 sq m to approximately 19,878 sq m.

Upon completion, a further sum of $13.08 million will be paid for the extension on the property.
The A&A works are expected to be completed within 12 months (Q2 2013) from the date of completion of the acquisition.

We view this acquisition positively as the company is able to gain a spread of 2 per cent (4.5 per cent interest rate incurred due to MTN and term loan against an average cap rate of 6.5 per cent) through this action with no dilution to shareholders' equity.

We maintain our 'buy' call with a TP of $0.605.
BUY

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