Singapore ramps up Australian logistics raid

Australia’s industrial market is set for a big year.

The surge of investment by Singaporean real estate investment trusts into Australian warehouses and logistics facilities is set to continue, with the Cambridge Industrial Trust joining the throng.

The group, which owns a portfolio of 51 properties in Singapore worth about $1.4 billion, is targeting the acquisition of an Adelaide industrial facility, and is believed to be close to striking a deal.

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Cambridge last month said it would hunt for property in Australia and Japan, as well as in Singapore, as it flagged it would also undertake a strategic review. Cambridge’s manager is controlled by a trio of stakeholders — the National Australia Bank, Oxley Group, and Japan’s Mitsui, with the Australian bank holding a 56% interest.

NAB and Oxley last year fielded expressions of interest for their stakes. Although a deal did not eventuate, merger activity is tipped in the S-REIT sector, and a push offshore would see Cambridge bulk up and put it on par with its many rivals that have forged into Australia.

Australia has a clear-cut investment holding structure for offshore capital known as a managed investment trust that allows investors like REITs to enjoy lower withholding tax

Cambridge has strong local ties. Philip Levinson, chief executive of the trust manager, held senior roles at Park Hill Real Estate Asia, raising capital across Asia. He also set up Blackstone’s Australia operations in 2009 and had earlier worked at Deutsche Asset Management and LaSalle Investment Management.

Industrial S-REITs made up the lion’s share of the foreign buyers in the Australian industrial real estate market last year. A JLL analysis of the $5 billion of assets to change hands in the sector last year shows overseas buyers outnumbered domestic buyers for the first time.

Large scale industrial facilities will be hot property in 2016.

Ascendas paid about $1 billion for the GIC industrial portfolio last year.

High-profile deals included ­Ascendas REIT’s purchase of the 26-property GIC portfolio for about $1 billion, followed by the group picking up a Sydney facility for $77 million later in the year. Similarly, Mapletree Logistics Trust made a $253 million logistics acquisition in Sydney while Cache Logistics Trust bought four separate logistics ­facilities across Australia.

Cache Logistics Trust chief executive Dan Cerf says that while the Australian market offers a higher net operating income yield of 6.5-8.5% for logistics assets, as well as longer lease terms, it also has clearer land-use zoning compared to other markets like Japan.

“Australia has a clear-cut investment holding structure for offshore capital known as a managed investment trust that allows investors like REITs to enjoy lower withholding tax. This coupled with the favourable Australian dollar/Singapore dollar position makes the market an attractive option,” he says.

JLL head of industrial in Australia, Michael Fenton, says the local market will continue to draw foreign capital, particularly S-REITs, on the back of strong fundamentals.

“The Australian industrial sector offers historically higher income returns than office and retail investments,” he says.

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