Cache Logistics Trust (CACHE) announced yesterday that it has entered into an agreement with DHL Supply Chain Singapore Pte Ltd to develop and lease a build-to-suit (BTS) ramp-up warehouse. The total cost of the project is estimated to be ~S$123.5m. Temporary occupation permit is expected to be issued by 2H15. Upon completion, DHL Supply Chain will occupy 100% of Block 1 NLA, 50% of Block 2 NLA from year 3 onwards, and 100% of Block 2 NLA from year 5 onwards. All three lease terms will co-terminate at the end of the initial 10-year period, with an option for renewal. According to management, the stabilized NPI yield is expected to be comparable to CACHE’s existing properties in the vicinity, and annual rental escalations will apply throughout the first lease term. We estimate a NPI yield-on-cost of 8.5% and rental escalation of 1.5%, with contribution to start in 2016. Our value fair is now raised from S$1.20 to S$1.25. Maintain BUY.
Development of ramp-up warehouse
Cache Logistics Trust (CACHE) announced yesterday that it has entered into an agreement with DHL Supply Chain Singapore Pte Ltd to develop and lease a build-to-suit (BTS) ramp-up warehouse located at Greenwich Drive, Tampines LogisPark. The development comprises two blocks with a total GFA of ~989,200 sqft and NLA of ~928,100 sqft. The total cost of the project is estimated to be ~S$123.5m, including S$105.1m development costs and S$18.4m non-development expenses.
Arrangements relating to development
Development risk is minimised through a fixed price building works contract with Precise Development Pte Ltd, a qualified and well-established contractor founded in 1983. Recall that CACHE acquired a ramp-up warehouse from the contractor via a sale-and-leaseback arrangement in Apr 2013. In addition, CACHE’s sponsor, CWT Limited, will assist by providing strategic project management expertise. Temporary occupation permit is expected to be issued by 2H15. Upon completion, DHL Supply Chain will occupy 100% of Block 1 NLA, 50% of Block 2 NLA from year 3 onwards, and 100% of Block 2 NLA from year 5 onwards. All three lease terms will co-terminate at the end of the initial 10-year period, with an option for renewal. In our view, the lease with DHL Supply Chain (part of world’s leading logistics solution provider Deutsche Post DHL) will provide CACHE with quality long-term recurring income, while improving its portfolio’s average lease term from 3.1 years to 4.1 years.
Maintain BUY; fair value raised
According to management, the stabilized NPI yield is expected to be comparable to CACHE’s existing properties in the vicinity, and annual rental escalations will apply throughout the first lease term. We also understand that CACHE has secured a loan facility of S$97.0m to finance the development (remaining costs to be funded by internal sources). We estimate a NPI yield-on-cost of 8.5% and rental escalation of 1.5%, with contribution to start in 2016. Our value fair is now raised from S$1.20 to S$1.25. Maintain BUY.
Cache Logistics Trust (CACHE) announced yesterday that it has entered into an agreement with DHL Supply Chain Singapore Pte Ltd to develop and lease a build-to-suit (BTS) ramp-up warehouse located at Greenwich Drive, Tampines LogisPark. The development comprises two blocks with a total GFA of ~989,200 sqft and NLA of ~928,100 sqft. The total cost of the project is estimated to be ~S$123.5m, including S$105.1m development costs and S$18.4m non-development expenses.
Arrangements relating to development
Development risk is minimised through a fixed price building works contract with Precise Development Pte Ltd, a qualified and well-established contractor founded in 1983. Recall that CACHE acquired a ramp-up warehouse from the contractor via a sale-and-leaseback arrangement in Apr 2013. In addition, CACHE’s sponsor, CWT Limited, will assist by providing strategic project management expertise. Temporary occupation permit is expected to be issued by 2H15. Upon completion, DHL Supply Chain will occupy 100% of Block 1 NLA, 50% of Block 2 NLA from year 3 onwards, and 100% of Block 2 NLA from year 5 onwards. All three lease terms will co-terminate at the end of the initial 10-year period, with an option for renewal. In our view, the lease with DHL Supply Chain (part of world’s leading logistics solution provider Deutsche Post DHL) will provide CACHE with quality long-term recurring income, while improving its portfolio’s average lease term from 3.1 years to 4.1 years.
Maintain BUY; fair value raised
According to management, the stabilized NPI yield is expected to be comparable to CACHE’s existing properties in the vicinity, and annual rental escalations will apply throughout the first lease term. We also understand that CACHE has secured a loan facility of S$97.0m to finance the development (remaining costs to be funded by internal sources). We estimate a NPI yield-on-cost of 8.5% and rental escalation of 1.5%, with contribution to start in 2016. Our value fair is now raised from S$1.20 to S$1.25. Maintain BUY.
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