REITs, by their nature, are expected to make acquisitions of real estate assets in order to satisfy their goal of increasing their payouts to unitholders.
EC World REIT, which listed in July 2016 with 6 properties, has just made its maiden acquisition post-IPO.
The Wuhan asset is currently used for warehousing purposes with an ancillary dormitory use.
The weighted average lease expiry (WALE) is 2.3 years by gross rental and 2.4 years by net lettable area.
This is relatively short but it works in favour of the asset owner as rents are expected to rise -- given the high demand for e-commerce facilities -- upon either renewal of a lease or a new tenant taking up the space.
The transaction enhances the REIT's unique proposition as a specialised e-commerce logistics REIT.
At present, 30.7% of its portfolio is in the e-commerce logistics sector while another 34.1% is in the specialised logistics sector (by net lettable area).
With a low gearing of 29.2% post-Wuhan acquisition, the REIT is looking to make further acquisitions, possibly in Southeast Asia.
The focus is on assets that have specialised use (such as e-commerce warehousing and fulfilment centres) as well as other logistics assets providing strategic connectivity in the supply chains.
For more on the Wuhan acquisition, see Powerpoint materials here.The total purchase consideration for the Wuhan property is RMB145 million (S$30.3 million), which is a 15.2% discount to the independent valuation of RMB171 million done by Colliers International.