ESR-REIT JV to buy logistics property for $225m

The site will serve as Poh Tiong Choon Logistics’ corporate headquarters.

The trustee of ESR REIT has entered into a joint venture (JV), through a limited liability partnership in Singapore known as PTC Logistics Hub LLP, with Poh Tiong Choon Logistics (PTC) to purchase a property at 48 Pandan Road for $225m, an announcement revealed.

A newly redeveloped 6-storey ramp-up warehouse with rooftop parking, the 1.09 million sqft property obtained its Certificate of Statutory Completion, and houses an ancillary dormitory, a temporary ancillary canteen and an ancillary office which serves as PTC’s corporate headquarters.

The purchase consideration of $225m will reportedly be funded through a $40.2m contribution by PTC, a $38.6m contribution by the trustee, and debt of approximately $146.2m to be taken out by the LLP. In connection with the Proposed Acquisition, the total acquisition cost attributable to ESR-REIT is $44.4m.

On completion of the proposed acquisition, the property shall be leased back by the LLP as landlord to PTC as tenant for a term of 10 years with fixed rental escalation per annum, ESR-REIT said.

“The addition of the property enhances the quality of ESR-REIT’s logistics portfolio to comprise four in-demand and modern ramp-up logistics properties, representing 60% of ESR-REIT’s logistics portfolio. Rental income from the logistics portfolio will also increase from 19.7%3 to 22.3% following the proposed acquisition,” ESR-REIT noted in its filing with the Singapore Exchange (SGX).

The proposed acquisition would also increase ESR-REIT’s portfolio weighted average lease expiry (WALE) from 3.7 years to 3.9 years, and improve the lease expiry concentration for 2024 and beyond from 25.6% to 28.2%. Overall portfolio occupancy would also improve from 92% to 92.6%, above the JTC average of 89.3%.

ESR-REIT and PTC have each made an initial capital contribution to the LLP of $1 in cash. ESR-REIT currently holds 49% of the partnership interests in the LLP whilst PTC holds the remaining 51%.