On Oct 19, Daiwa House Asset Management Asia independent non-executive director Tan Juay Hiang acquired 10,000 units of Daiwa House Logistics Trust at 55.0 cents per unit.

 

This took his direct interest in the Reit to 170,000 units.

 

Tan has had 14 years of relevant experience in real estate fund management. He was the fund manager of Ascendas Asean Business Space Fund from 2007 to 2010, where he structured the fund and raised US$400 million for it, and invested in Malaysia, Vietnam, and the Philippines.

 

He held the appointment of senior vice-president, real estate fund at Ascendas Pte Ltd from March 2010 to June 2012, where he was responsible for setting up the new fund and undertaking the capital raising.

 

From July 2012 to December 2019, he was CEO of Ascendas Hospitality Fund Management, the manager of Ascendas Hospitality Trust, where he was responsible for performance, compliance, and execution of management strategies.

 

From January 2020 to July 2020, he acted as managing director of Ascott, where he was responsible for the investments of Ascott Residence Trust.

 

Daiwa House Logistics Trust will provide a Q3 2022 business update before the Nov 9 open.

 

Daiwa House Logistics Trust has launched its maiden acquisition following its IPO last November, with plans to buy two freehold logistics facilities and a piece of freehold land in Japan from sponsor Daiwa House Industry for 4,68 billion yen, or $47.7 million.

 

According to DHLT, the blended implied NPI yield for these two properties is 6.5%, which is higher than the blended NPI yield of the existing properties in DHLT' s portfolio of 6.1%.

 

The purchase price is at a discount of 11.8% off the appraised value of $54.1 million of these properties as at June 30.

 

DHLT plans to fund the acquisition by a mix of bank borrowings as well as the subscription of new units worth 1.25 billion yen in DHLT by the sponsor.

 

The subscription price of the new units will be the higher of either the 10-day VWAP of DHLT, or at least 77 cents per unit. At this price, it is a premium of 14.9% to DHLT&rsquo s closing price of Sept 20. It is also equivalent to the net asset value of DHLT as of June 30. Or,

 

According to DHLT, this commitment is a signal of the sponsor&rsquo s &ldquo strong commitment and support&rdquo towards the REIT&rsquo s growth and continued development.

 

The properties to be acquired are DPL Iwakuni 1 & 2, and D Project Matsuyama S, plus the underlying freehold land of D Project Iruma S, an existing property in the portfolio of DHLT.

 

The buildings are fully occupied as at June 30, leased to tenants such as one of the largest integrated logistics companies in Japan, as well as a leading integrated food trading company in Japan which also provides 3PL services.

 

Takeshi Fujita, CEO of the manager, says the acquisition will help lift DPU by 1.3% on a pro forma basis, and will enhance the quality of its portfolio.

 

&ldquo Amidst challenges in the macro environment, we observed that logistics properties in Japan have remained resilient, while demand for logistics space is expected to remain healthy,&rdquo he says.

DAIWA : DHLU +1.35% House Logistics Trust on Wednesday (Aug 3) posted a distribution per unit (DPU) of S$0.0309 for the period between Nov 26, 2021 (its listing date) and Jun 30, 2022.

 

This was in line with its pro-rated forecast disclosed in its initial public offering prospectus, the manager said.

 

A weaker yen against the Singapore dollar led net property income and gross revenue to fall short of the real estate investment trust&rsquo s (Reit) pro-rated forecasts from the prospectus.

 

Net property income slid 4.5 per cent to S$30 million from the pro-rated forecast of S$31.5 million, while gross revenue dropped 3.6 per cent to S$38.9 million from the S$40.4 million projected.

 

On a yen basis, gross revenue was 0.4 per cent higher at 3.5 billion yen, due to higher utilities income and other income compared with what was assumed in the manager&rsquo s forecast.

 

Higher capital returns from Japan entities had also lifted distributable income to S$20.9 million, in line with estimates, despite the weaker yen against the Singapore dollar.

 

The Reit&rsquo s DPU of S$0.0309 will be paid out on Sep 6, after the record date on Aug 12.

 

On top of bagging a new lease, all leases due to expire during the half year were renewed, bringing the occupancy rate to 98.6 per cent as at Jun 30. Rents also rose at an average of 3.1 per cent during the period.

 

The Reit&rsquo s weighted average lease expiry stood at 6.8 years, while gearing was 34 per cent as at end-June.

 

DAIWA House Logistics Trust : DHLU -3.11% on Thursday (May 12) posted a distribution per unit (DPU) of S$0.0131 for the first quarter ended Mar 31, 2022. This was up 0.8 per cent from its pro-rated forecast of S$0.013, the manager said in its first business update since the real estate investment trust&rsquo s (Reit) listing on Nov 26, 2021.

 

It added that financials for the quarter were in line with the pro-rated forecasts disclosed in its initial public offering (IPO) prospectus.

 

Gross revenue for the 3 months ended March was down 0.8 per cent to S$16.8 million for the period from the S$16.9 million pro-rated forecast, while net property income (NPI) stood at S$13.3 million &ndash 1.4 per cent higher than the pro-rated forecast of S$13.2 million.

 

Distributable income was 0.6 per cent higher at S$8.9 million, from the S$8.8 million listed in the pro-rated forecast.

 

For the period between the listing date and end-March, DPU stood at S$0.018, up 0.6 per cent from pro-rated forecast. Distributable income was 0.5 per cent higher than the IPO forecast at S$12.2 million.

 

NPI for the Nov 26, 2021 to Mar 31, 2022 period was 1.6 per cent higher than the forecast at S$18.6 million, but gross revenue was 0.4 per cent lower than forecast at S$23.4 million.

 

Overall portfolio occupancy improved to 98.6 per cent as at Mar 31, with all properties except for 1 at full occupancy. The Reit&rsquo s weighted average lease expiry by occupied net lettable area stood at 6.8 years. Gearing meanwhile, stood at 38.2 per cent as at end March.

 

The Reit will pay its first distribution for the period from listing date to Jun 30, 2022 on or before Sep 30, 2022. The Reit will distribute 100 per cent of its annual distributable income for that period, as per its distribution policy.

AFTER a relatively quiet period, Singapore' s equity capital market saw a burst of fundraising activity in the last quarter of the year. Notably, 2 fairly large real estate investment trusts (Reits) came to market. They have seen different fortunes since their listings, but both have several factors in their favour.

 

Logistics and industrial Reit Daiwa House Logistics Trust (DHLT) and pure-play data centre trust Digital Core Reit (DC Reit) made their trading debuts on the mainboard of the Singapore Exchange (SGX) within weeks of each other: on Nov 26 and Dec 6, respectively.

 

This brought the number of Singapore-listed real estate investment trusts (S-Reits) and property trusts on SGX to 44, with a combined market capitalisation of over S$110 billion.

 

On the face of it, DHLT and DC Reit share some common traits.

 

First, they both own real estate assets in the popular " new economy" space - a space that has held up well amid the pandemic.

 

Both are also backed by big-name overseas sponsors that have a healthy pipeline of properties, for which the newly listed Reits will have right of first refusal (ROFR).

 

DHLT' s sponsor, Japan-based Daiwa House Industry Co (DHI), is a property developer and real estate fund manager listed on the Tokyo Stock Exchange (TSE).

 

As at end-September, DHI was managing real estate funds with aggregate assets under management (AUM) of 1.66 trillion yen (S$19.6 billion), including TSE-listed Daiwa House Reit Investment Corporation.

 

DHLT' s initial portfolio comprises 14 logistics properties in Japan. The Reit will have ROFR from its sponsor to another 11 properties in Indonesia, Vietnam and Malaysia as well as a further 17 properties in Japan.

 

This adds up to a potential portfolio size of 42 assets with a gross floor area of over 1.5 million square metres - more than treble the initial portfolio.

 

DC Reit' s sponsor, US-based Digital Realty Trust, is the largest owner and operator of data centre providers in the world.

 

The sponsor Digital Realty is itself listed as a Reit on the New York Stock Exchange (NYSE). Digital Realty is among the 10 largest publicly traded US Reits, with a market cap of US$48.4 billion as at Dec 27.

 

DC Reit' s initial portfolio comprises 10 data centres in the United States and Canada. The sponsor is providing a global ROFR to the S-Reit, giving DC Reit a potential pipeline of over US$15 billion of assets both existing and under construction.

 

Diverging performance

 

Both Reits received healthy interest from investors in their respective IPOs.

 

The public offer in DHLT' s IPO saw subscriptions for 9.5 times the number of units available, while interest in the international placement tranche was 4.9 times the number of units available.

 

DC Reit did even better. Its public offer to Singapore retail investors received subscriptions for 16.1 times the number of units available, while for the international placement tranche the rate was 19.6 times.

 

The difference in the level of interest has been reflected even more starkly in the difference in trading performance.

 

DHLT closed flat at its IPO price of S$0.80 cents on the day it made its trading debut, after opening 1.3 per cent higher at S$0.81. Since then, the counter has traded sideways, closing at S$0.805 on Dec 27.

 

This comes as a surprise to market watchers, as the logistics sector has been one of the outperformers amid the pandemic.

 

Meanwhile, investors seem to need no convincing of the merits of a data centre play - especially one that was the largest IPO in Singapore this year.

 

DC Reit jumped 14.8 per cent higher than its IPO price of US$0.88 to close at US$1.01 on its trading debut, after opening at US$1.

 

The counter closed at US$1.16 on Dec 27, giving it a market cap of US$1.31 billion.

 

Comparing valuations

 

The lacklustre interest in DHLT could in part be due to its relatively small size. Its market cap stood at S$543.4 million as at Dec 27. That ranks it at 34th position among the S-Reits.

 

But compared to some of its peers, DHLT also looks undervalued. It is currently trading at a 6 per cent premium to its net asset value (NAV) per unit of S$0.76.

 

By comparison, logistics peers ARA Logos Logistics Trust and Mapletree Logistics Trust (MLT) are trading at close to 30 per cent and 40 per cent premiums, respectively. ARA Logos has a market cap of S$1.29 billion while MLT has a market cap of S$8.99 billion.

 

Also, DHLT' s NAV is based on the acquisition price of its portfolio - an 11.8 per cent discount to the appraised value of the properties. The Reit could enjoy an uplift in its NAV when the Reit manager does another valuation this month.

 

Meanwhile, DC Reit is trading at a 38 per cent premium to its NAV per unit of US$0.84.

 

That valuation is significantly better than DHLT' s. But it is still below the valuation of its closest peer Keppel DC Reit, which is trading at twice its book value.

 

Mapletree Industrial Trust, which also has exposure to data centre assets, is trading at an over 40 per cent premium to NAV.

 

DC Reit has quickly won investors over. A day after it commenced trading, UOB Kay Hian initiated coverage on the counter with a " buy" recommendation and a target price of US$1.18.

 

" With 68.5 per cent of its base rental income derived from hyperscalers, DC Reit benefits from strong demand for hyperscale data centres expanding at a compound annual growth rate (CAGR) of 23 per cent in 2020 to 2024," said analyst Jonathan Koh, explaining that hyperscalers are tech giants such as Amazon, Facebook, Google, IBM and Microsoft, which dominate the cloud services industry.

 

" (DC Reit' s) ability to scale up through acquisitions is supported by its low aggregate leverage of 27 per cent and its more competitive cost of debt of 1.0 per cent," he added.

 

It might be too early to say what the next chapter may bring for DHLT and DC Reit. But choosing to list amid the worst of times - in a pandemic - may yet prove to be the best of times for the 2 recent Reit IPOs.