MapletreeLog in 27.8b yen property deal

MapletreeLog in 27.8b yen property deal
March 23rd, 2007

Mapletree Logistics Trust yesterday said it is acquiring the beneficiary interest of five logistic properties in Japan for 27.8 billion yen (S$358.2 million).

Based on the letter of undertaking, the Reit will buy the beneficiary interest from a special-purpose company, which is managed by Itochu Corporation, and the transaction has been structured as an outright sale of beneficiary rights with assignment of existing tenancies.

Four of them - Atsugi Centre, Ayase Centre, Funabashi Centre and Zama Centre - are located in the Greater Tokyo area, while the Kyoto Centre is in the Kyoto (Kansai) area. The deal will be accretive to MapletreeLog’s distribution per unit and its pro forma effect for the year ended Dec 31, 2006 would be an additional 0.56 Singapore cents per unit.

Said Chua Tiow Chye, CEO of Mapletree Logistics Trust Management: ‘This portfolio of assets is accompanied by long-lease tenures which vary from seven to 18 years from tenants with very good credit standing, bolstering our core base of leases which yield stable and recurrent rental income.’

Also, he said the new facilities complement the Reit’s shorter-term leases from higher-growth markets such as China, Malaysia and Hong Kong. ‘The addition of these longer-term leases will lengthen the average lease tenure and the unexpired lease term of underlying land of MapletreeLog’s portfolio,’ Mr Chua added.

Besides providing geographical diversification, MapletreeLog said the acquired portfolio also comes with strong tenant base, including top Japanese third-party logistics (3PL) service providers and major supermarket suppliers.

The deal is MapletreeLog’s single-largest transaction to date, and is the trust’s second with Itochu. The trust had bought Gyoda Distribution Centre - its first property in Japan - from Itochu last month.

MapletreeLog expects the latest acquisition to be completed in the middle of this year, adding that it will be wholly funded by debt due to the lower cost of borrowing in yen.

Also, the trust will benefit ‘by structuring the acquisition in such a way that the properties’ net income inflows in yen will be exchanged for Singapore dollars through a currency swap. Based on prevailing forward contract rates, the average annual pick-up is estimated to be one to 2 per cent’, it said in a statement.

MapletreeLog is upbeat on prospects in Japan, pointing to its 2.2 per cent economic growth last year and citing forecast from the Economist Intelligence Unit that it may grow another 2 per cent this year and 2.1 per cent in 2008.

‘The improving economic conditions in Japan and the consequent increase in business activities have boosted demand for new logistics facilities,’ it said in a statement.

Another factor is the growing trend among companies to outsource their logistics operations to 3PL operators, as this allows them to streamline their balance sheets and focus their resources on core operations.

Citing Colliers International, MapletreeLog says demand for quality logistics space in Japan is picking up, driven by corporate capital investment.

‘There is a shortage of bigger, modern and efficient distribution centres located in key areas. Currently, modern distribution facilities that measure more than 3,000 square metres in floor area represent less than half of the total national stock in Japan,’ it added.

Source: The Business Times, 23 March 2007