Daiwa House Logistic Trust: Mixed feeling
$Daiwa Hse Log Tr(DHLU.SI)$ Last night, Daiwa House Logistic Trust (“DHLT”) announced its intention to acquire 2 freehold properties and a freehold land where the existing warehouse is already sitting from its Sponsor. The total purchase consideration is ~S$47.7million and it’s intended to be funded by cheap JPY borrowings and partial payment in units to its Sponsor. The acquisition is projected to deliver ~1.3% DPU accretion based on pro-forma numbers.
The NPI entry yield is pretty decent at 6.5%. One of the new warehouses, DPL Iwakuni 1 & 2, is newly built and pretty modern, but there is no information if this is a ramp-up or cargo-lift installed warehouse. Moreover, D Project Matsuyama S is a relatively older and smaller warehouse completed in 1994 that is built-to-suit.
The good thing about this acquisition is that the Sponsor is willing to support the fund raising by accepting the new units for payment at higher of NAV or 10 Day VWAP. This issued price is 15% higher than the current trading price of DHLT. This demonstrates the Sponsor’s confidence as it invests a portion of the proceeds back into the REIT to show its skin in the game. I believe this is the reason why the share price rise in the midst of the red sea after Fed’s hike last night.
However, what I dislike about the Sponsor is how cunning they are to sell the property (with limited land tenure) and the freehold land separately for D Project Iruma S Land to unitholders. This feels like the Sponsor is out to milk unitholders by purposely engineering such transactions. I believe DHLT will be forced to buy more of such “freehold land” in the future. Mind you, D Project Iruma S’s freehold land is more than 2 times the price of D Project Matsuyam a S’s properties + freehold land.
Moreover, after last night Fed’s third 75bps rate hike with an ultra-hawkish tone, Yen’s depreciation hit record low of 145 to Dollar. This means that unitholders of DHLT will receive significantly less DPU in terms of SGD as illustrated in IPO. This may or may not be attractive to unitholders at the current moment.
Currently, I have mixed feeling for Daiwa as a Sponsor, and at the same time due to the macro environment, I prefer to wait and see first before investing in DHLT.
Above analysis is purely my opinion and does not constitute as trade advice.
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