CLAR expands US logistics portfolio with first sale and leaseback acquisition for $150.3 million

The Indianapolis property is fully occupied by DHL USA, which will enter into a long-term leaseback till December 2035. Photo: CLAR

CapitaLand Ascendas REIT (CLAR) has proposed to acquire DHL Indianapolis Logistics Center, a Class A logistics property, from Exel Inc. d/b/a DHL Supply Chain (DHL USA) for $150.3 million. This is a 4.1% discount to the independent market valuation of the property as at Jan 1, 2025.

After adding transaction-related fees and expenses of $1.7 million, along with a $1.5 million acquisition fee paid to the manager, the total acquisition cost will be $153.4 million.

The manager intends to finance the total acquisition cost through a combination of internal resources, divestment proceeds and/or existing debt facilities, according to a Dec 17 press release.

Following the acquisition, DHL USA will enter into a long-term leaseback till December 2035 of the property’s entire gross floor area (GFA) with options to renew for two additional five-year terms.

The long lease term of approximately 11 years with built-in rent escalation of 3.5% per annum will provide income stability and strengthen the resilience of CLAR’s portfolio, says the manager.

The fully occupied property, with its weighted average lease to expiry (WALE) of approximately 11 years, will increase CLAR’s US portfolio WALE from 4.2 years to 4.7 years on a pro forma basis.

The first-year net property income (NPI) yield of the proposed acquisition is approximately 7.6% pre-transaction costs and 7.4% post-transaction costs. The pro forma impact on the distribution per unit (DPU) for the financial year ended Dec 31, 2023 is expected to be an improvement of approximately 0.019 Singapore cents, or a DPU accretion of 0.1%, assuming the proposed acquisition was completed on Jan 1, 2023.

Completed in 2022, the property is located in Whiteland, a submarket in southeast Indianapolis, Indiana. The property is a fully air-conditioned, single-storey logistics building with a GFA of 979,649 sq ft.

The acquisition will increase the value of CLAR’s logistics assets under management (AUM) in the US by 35.3% to some $587.5 million. With this acquisition, CLAR’s logistics footprint in the US will expand to 20 properties across four cities with a total GFA of approximately 5.1 million sq ft.

Besides this latest property in Indianapolis, CLAR’s logistics assets in the US are located in Kansas City, Chicago and Charleston.

William Tay, executive director and CEO of the manager, says: “DHL Indianapolis Logistics Center is a strategic fit with our existing portfolio… This is CLAR’s first sale and leaseback acquisition in the US and including this Class A logistics property, modern logistics assets will account for 42.3% of our US logistics assets under management. With the long lease in place, this property will further enhance CLAR’s resilient income stream, and we expect the two new properties to contribute positively to our long-term returns.”