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REITs investing & personal finance

Monday, November 22, 2021

Daiwa House Logistics Trust - Fundamental Summary from IPO Prospectus

Daiwa House Logistics Trust (DHLT) has lodged its IPO prospectus on 19th Nov 2021, it is a REIT with the investment strategy of principally investing in a portfolio of income-producing logistics and industrial real estate assets located across Asia. As a data-minded guy, I would like to summarize the IPO prospectus info as per my normal review post, come with some snapshots from the IPO prospectus: 

  • Offering Price: S$ 0.80
  • Offering Units: 244.438 million 
  • Indicative Dividend Yield: 6.3% for 2021; 6.5% for 2022
  • NAV per Unit:  S$ 0.76
  • P/NAV: 1.05
  • Shares Outstanding: 675 million
  • Market Cap: S$ 540 million
  • Dividend Policy: Semi-Annually; Distribution would be 100% of distributable income from listing date to end 2022. Thereafter, would be at least 90% of distributable income.

Related Party Shareholding
  • Sponsor: Daiwa House Industry Co., Ltd.
  • Sponsor Shareholding: 10% or 14% subjected to whether over-allotment is exercised. 
  • Manager Shareholding: No Info, however, the manager has elected to receive 50.0% of the Base Fee and Performance Fee (if any) in the form of Units for 2021 and 2022.
  • Directors of REIT Manager Shareholding: No Info

Lease Profile

  • Number of Properties: 14 Units
  • AUM: S$ 1.07 billion (include right-of-use asset)
  • Occupancy: 96.3%
  • Income in SGD/Major Currencies: 100%
  • WALE by NLA: 7.2 years
  • Highest Lease Expiry in Single Year by NLA: 46.9% falls in 2026 and onwards, without breakdown
  • Weighted Average Land Lease Expiry by NLA: 67.94 years

Debt Profile

  • Gearing Ratio (based on purchase consideration):  43.8% ; 47.5% including perps
  • Gearing Ratio after Refund of Consumption Tax by 2Q 2022 (based on purchase consideration): 36.9%; 40% including perps
  • Cost of Debt: 1.14%
  • Fixed Rate Debt %: 100%
  • Unsecured Debt %: 0% (assume consumption tax loan is secured loan)
  • WADM: 3.6 years (assume JPY 29.0 billion loan from facilities lenders is evenly spread between 3 tranches)
  • Highest Debt Maturity in Single Year: 30% falls in 2026 (assume JPY 29.0 billion loan from facilities lenders is evenly spread between 3 tranches)
  • Interest Coverage Ratio: 9.3 for 2021, 10.3 for 2022
  • Perps over (Debt + Perps) %: 7.8%

Diversification Profile

  • Top Sector Contribution by NLA: 79% of Logistics Trade
  • Top Geographical Contribution by NPI: 48.9% for 2021, 47.6% for 2022
  • Top Property Contribution by NPI: 28.4% for 2021, 27% for 2022
  • Top 5 Properties Contribution by NPI: 63.6% for 2021; 62.5% for 2022
  • Top Tenant Contribution by NPI: 20.3% 
  • Top 10 TenantS Contribution by NPI: 71.1% 

Key Financial Metrics

  • Property Yield (based on purchase consideration): 4.9%
  • Management Fees over Distribution: 10% (base fee)
  • Distribution on Capital: 3.5% for 2021; 3.6% for 2022
  • Distribution Margin: 50.3% for 2021; 52.2% for 2022

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow REIT Sponsor's Shareholding
Long WALE0% Unsecured Debt
Low Cost of DebtHigh Top Property Contribution
100% Fixed Rate DebtHigh Top Tenant & Top 10 Tenants Contributions
Long WADM 
High Interest Coverage Ratio 
Low Top Geographical Contribution 
Competitive Management Fees
Generally, DHLT is considered as a small-cap REIT and its fundamental is a decent one. From the prospectus, the sponsor is one of the largest construction and real estate development companies in Japan, which is listed in TSE with a S$ 29.5 billion market cap. The sponsor has shown its support by providing an 11.8% discount on the appraised value for the IPO portfolio.

For those who like to know more, you could download the prospectus here. Below is the timetable if one is interested to apply for it.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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