Cache Logistics Trust (CACHE) has proposed to acquire a single-storey warehouse with ancillary office space located in Laverton North, a suburb of Melbourne, Australia, from Challenger Life CDI Nominees Pty Limited. The purchase consideration is A$22.25m, which translates into an initial NPI yield of 7.4%.

This freehold warehouse has a GLA of 223,061 sq ft and is currently 100% leased to Spotlight, a leading retail chain selling fabric, craft and homeware items.

The remaining lease term is ~4.5 years by NLA (expiring 1 Jul 2021 with two 6+6 years renewal options) and there is a fixed annual rental escalation of 3.25% embedded in the lease.

CACHE intends to fund this proposed acquisition with net proceeds from its recent divestment of Cache Changi Districentre 3. As such, its gearing is expected to increase only marginally from 43.1% to 43.2%.

We maintain our HOLD rating and S$0.78 fair value estimate on CACHE.

Source: OCBC Research - 23 Feb 2017