ARA takeover lowers Cache Logistics Trust's lease renewal risks

Lease expiries fell to 6.7% of leasable area for the rest of 2018.

ARA Asset Management’s takeover of Cache Logistics Trust could mean lower lease renewal risks for the REIT, CGS-CIMB said in a report.

CGS-CIMB Lock Mun Yee noted that the confirmation of the expiry of the master lease at CWT Commodity Hub in April 2018 and clarity over the potential impact of conversion into a multi-tenanted building should lend some stability to the share price.

“Management guided that the gross average rental from the underlying leases should yield similar income as the master rent, although we think there may be some shortfall from lower space efficiency and the current vacancy of 14%,” Lock said. It has also reduced lease expiries to 6.7% of portfolio net leasable area (NLA) due for the remainder of FY2018, she added.

Overall, the consolidation of ownership and decision-making is positive for Cache. “Over the past three years, the trust has embarked on a portfolio rebalancing and growth strategy, particularly in Australia,” Lock said. “With a greater alignment of interest with ARA, we believe the trust would continue to be able to tap into ARA’s expanding presence and network in the Asia-Pacific region.”

Moreover, the amalgamated interest in the property manager would also ensure good continuity in the management of Cache’s properties.