UPDATE: Ascendas REIT to acquire 11 logistics properties in Kansas City

U.S. five dollar currency notes bills; taken September 2018.U.S. five dollar currency notes bills; taken September 2018.

This item was originally published on Friday, 22 October 2021 at 11:36 a.m. SGT; it has since been updated with a clarification on the properties’ locations.

Ascendas REIT plans to acquire 11 last-mile logistics properties located in Kansas City in the United States for S$207.8 million, or around US$156 million, from third-party vendors ColFin 2017-11 Industrial Owner, LLC and ColFin Cobalt I-II Owner, LLC, the REIT said in a filing to SGX Friday.

William Tay, executive director and CEO of the REIT’s manager, said the acquisition marked the REIT’s first foray into the U.S. logistics market.

“The strong market fundamentals driven by rising warehousing requirements for ecommerce fulfilment has led to record net absorption levels and rent growth across the country. We are confident of the growth potential of this portfolio given Kansas City’s geographically central location within the U.S. and its well-developed transportation infrastructure,” Tay said in the statement.

He noted the properties have good access to the domestic market, Midwest populations centers and other commercial hubs.

The estimated net property income yield for the first year post-acquisition is around 5.0 percent, including transaction costs, while the pro forma distribution per unit (DPU) accretion is expected at 0.73 percent, or around 0.11 Singapore cent, the filing said.

The deal will be partly financed by the proceeds from the divestment of three logistics properties in Australia, with the remainder financed with debt facilities, Ascendas REIT said.

An independent valuation of the portfolio, commissioned by the REIT’s trustee, HSBC Institutional Trust Services (Singapore), came in at US$156.3 million as of 24 September, the filing said.

The REIT said demand for logistics space in the Kansas City area has been strong, with the overall sector vacancy rate low and stable at 4.5 percent to 5.9 percent since 2015, driven by demand from e-commerce, third-party logistics, food and beverage and automotive manufacturing users.

Ascendas REIT clarified to Shenton Wire that some assets are in Kansas state and some in Missouri.

The 11-property portfolio is 92.6 percent occupied by 27 tenants from diverse industries, including third-party logistics, wholesale distribution, manufacturing and healthcare, with no single tenant contributing more than 10 percent of total rental income as of end-September, the REIT said.

The acquisition will increase the REIT’s exposure to logistics properties to 22 percent on a pro forma basis of total investment properties, up from 21 percent at end-September, as well as diversifying the logistics portfolio to a fourth market after Australia, Singapore and the U.K., Ascendas REIT said.

The deal is expected to close in the fourth quarter, the REIT said.

Once the deal is completed, Ascendas REIT, also called AREIT, will own 221 properties with an expected valuation of around S$16.2 billion, with 97 properties in Singapore, 41 in the U.S., 34 in Australia and 49 in the U.K. and Europe.