MI-Reit To Buy Warehouse For $18.3m

Source : The Business Times, September 1, 2007

MACARTHURCOOK Industrial Reit (MI-Reit) has signed a conditional put and call option agreement to acquire a four-storey office and warehouse facility at 7 Clementi Loop for $18.3 million.

The vendor of the facility, Nova Engineering and Logistics, will lease back the property for five years, with the option to extend the lease for another five years.

The lease will start after refurbishment to the building is completed by Nov 30, which is when MI-Reit's acquisition of the property is expected to be completed.

Based on this scheduled completion date, the pro forma financial effect on MI-Reit's distribution per unit (DPU) for the financial year ended March 31, 2008 is an additional 0.20 cents per unit on an annualised basis.

This represents an increase of 2.7 per cent from the forecasted FY2008 DPU of 7.41 per cent per unit.

For FY2009, the pro forma effect of the acquisition is an additional 0.23 cents a unit, representing an increase of 3 per cent over the forecasted DPU of 7.59 cents a unit.

Chris Calvert, CEO of the Reit manager MacarthurCook Investment Managers (Asia), said that apart from the yield accretion derived from the deal, the property will provide greater geographic diversification to the Reit's portfolio and provide exposure to the growing logistics and warehousing property sub-sector here.

'MI-Reit will benefit from firm rentals and capital values in this sub-sector as a result of the strong demand for high quality and strategically located warehousing and logistics property, arising from the growing outsourcing trend in high value-added industries,' said Mr Calvert.

The acquisition will reduce MI-Reit's exposure to UE Tech Park, the Reit's largest property by value, from 36.1 per cent to 34.1 per cent of total portfolio value. In terms of income source, exposure to UE Tech Park is reduced from 33.2 per cent to 31.3 per cent.

The purchase of 7 Clementi Loop is also the first of a series of acquisitions worth a total of $500 million that MI-Reit intends to complete by March 31, 2008.