Daiwa House Logistics Trust IPO: What Investors Should Know

Daiwa House Logistics Trust will be the first real estate investment trust (REIT) to be listed in Singapore this year.

The REIT, which invests in logistics and industrial real estate assets located across Asia, has filed for its initial public offering (IPO).

Here’s what investors should know about Daiwa House Logistics Trust before investing!

TL;DR: Daiwa House Logistics Trust’s IPO Deets

Here are some details about Daiwa House Logistics Trust:

• Daiwa House Logistics Trust is a logistics and industrial REIT that currently owns 14 logistics properties in Japan
• The REIT portfolio has a high occupancy rate of 96.3%, with a diversified blue-chip tenant base
• Its properties are located strategically near transportation and shipping nodes
• Growth for the REIT can come from property acquisitions from its sponsor

What’s Daiwa House Logistics Trust About?

Daiwa House Logistics Trust is a logistics and industrial REIT intending to invest in a portfolio of income-producing logistics and industrial real estate assets located across Asia.

The REIT’s initial public offering (IPO) portfolio will have 14 logistics properties in Japan, and its valuation is around ¥80,570.0 million (S$952.9 million).

Here’s a chart from Daiwa House Logistics Trust’s IPO prospectus showing the location of its assets in Japan:

Daiwa House Logistics Trust’s sponsor is Daiwa House Industry (TYO: 1925), a real estate company listed on the Tokyo Stock Exchange.

The company was founded in 1955 and is one of Japan’s largest construction and real estate development companies.

On top of having operations in Japan, Daiwa House Industry is also actively involved in other markets, including ASEAN, East Asia, the US, Europe and Australia.

Key Investment Highlights of Daiwa House Logistics Trust

Daiwa House Logistics Trust boasts a high-quality logistics property portfolio with a strong occupancy rate of 96.3% as of 1 October 2021.

The REIT’s aggregate weighted average lease to expiry (WALE) by net lettable area is also long at 7.2 years, as of 30 June 2021.

Daiwa House Logistics Trust’s assets are located close to transportation and shipping infrastructure, which is attractive to its large third-party logistics (3PL) and e-commerce tenant base.

Daiwa House Logistics Trust also highlighted that its strong sponsor linkage is one of its positive aspects.

The REIT said that its sponsor Daiwa House Industry has deep knowledge of the logistics asset class, with a substantial pipeline in Japan and a growing portfolio across Southeast Asia.

In terms of growth prospects, the REIT has room to grow via acquisitions.

Daiwa House Industry has granted the right of first refusal (ROFR) to the REIT with regard to its pipeline of assets in Southeast Asia and Japan.

This means that the sponsor will offer properties to the REIT first before offering them to any third-party companies.

Daiwa House Logistics Trust will have a gearing ratio of around 43.8% upon listing, but it has room to fall, provided two things happen.

Firstly, the REIT’s IPO portfolio will be acquired at a discount to their appraised value.

If the appraised value remains the same at the end of the year, there will be a revaluation gain, reducing Daiwa House Logistics Trust’s gearing.

Next, Daiwa House Logistics Trust has a consumption tax loan that it will repay.

The repayment will be done after it receives consumption tax refunds from the Japanese tax authority by the end of 2022 second-quarter.

A lower gearing ratio will provide Daiwa House Logistics Trust with the debt headroom for future acquisitions from its sponsor.

Timeline of Daiwa House Logistics Trust IPO

Daiwa House Logistics Trust is looking to raise gross proceeds of around S$575.5 million from the IPO. 

The following shows the timeline of Daiwa House Logistics Trust IPO: 

Daiwa House Logistics Trust’s Distribution Details

One of Daiwa House Logistics Trust’s main objectives is to provide unitholders with regular, stable and long-term growth in distributions.

The REIT’s IPO prospectus has mentioned that its distributions will be made on a semi-annual basis.

Its distribution policy is to distribute 100% of its annual distributable income for the forecast period 2021 and projection year 2022 and at least 90% of its annual distributable income after that.

(Note: Forecast period 2021 is from 1 October 2021 to 31 December 2021, while projection year 2022 is from 1 January 2022 to 31 December 2022.)

At its IPO price of S$0.80, Daiwa House Logistics Trust’s distribution yield is estimated to be 6.3% for the forecast period 2021 and 6.5% for projection year 2022.

Meanwhile, Daiwa House Logistics Trust’s price-to-book (P/B) ratio will be 1.05x at its IPO price.

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer doesn’t own shares in any companies mentioned.

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