Iron Mountain uses the warehouse for its records management business.
After starting March with an investment in Singapore’s Lazada One office building, ESR’s ARA Asset Management teamed up with its Japanese joint venture, Kenedix, for a second time last month to acquire an industrial building in the city-state’s Jurong West area for S$47 million ($35.3 million).
A Kenedix-ARA fund took possession of Iron Mountain Centre II on 23 March, public records show, with the new owners leasing the property back to its former owner, American records management company Iron Mountain on a more than decade-long contract, according to sources familiar with the transaction who spoke with Mingtiandi.
CBRE, which brokered the deal, declined to comment on the deal, however, Rimon Ambarchi, who leads the brokerage’s industrial and logistics services division for Southeast Asia, said that with interest rates on the rise, investors are showing growing appetites for any income-producing assets.
“The industrial sector has shone in this regard as it is one of the few asset classes that are able to consistently provide a positive spread above borrowing costs,” Ambarchi told Mingtiandi on Tuesday. The transaction was first reported in the Business Times.
Two Out of Three
A document from the Singapore Land Authority shows that on 23 March, a caveat was lodged for the property at the junction of Chin Bee Drive and Corporation Road by SWI Property Holdings Pte Ltd – a joint venture between ARA and Kenedix. The title document for the 166,540 square foot (15,472 square metre) facility also shows that the 14-storey property is mortgaged to Sumitomo Mitsui Banking Corp.
Moses Song of ARA
ARA teamed up with Japanese giant Sumitomo Mitsui Finance and Leasing Company (SMFL) to buy out Kenedix in 2020, with the Singapore firm taking a 30 percent stake in the company versus 70 percent for its Japanese partner.
While the three companies had teamed up for two earlier Singapore acquisitions, including jointing buying a 50 percent stake in Lazada One for S$362.4 million last month, SMFL is said to not be directly involved in this latest transaction. Earlier last year the partners had acquired a a half-stake in the Capital Square office tower near Raffles Place for S$270 million.
In announcing their investment in Lazada One last month, the partners had said that they will continue to look for investment opportunities in Asia to expand their business.
Sale-and-Leaseback
The sale-and-leaseback transaction values the 2007-vintage property at over S$282 per square foot of its existing gross floor area. Located at 26 Chin Bee Drive, the single-user facility is nestled within western Singapore’s Boon Lay district, and is located opposite the Taman Jurong Greens neighbourhood near the banks of the Jurong River.
Iron Mountain Centre II’s 93,300 square foot plot has around eight years left on its current leasehold, which can be extended for another 19 years for a total of 27 years. It is understood that Iron Mountain plans to continue occupying the space for its records management business.
Based in the US, Iron Mountain specialises in information management services and also operates a 7.3 megawatt data centre in Serangoon. The company had acquired the Jurong West warehouse as part of its $2 billion acquisition of Australian information management provider Recall Holdings Ltd in 2016.
Neither ARA nor Iron Mountain had replied to inquiries regarding the transaction by the time of publication.
Industrial Rents on the Rise
The ARA-Kenedix industrial buy comes as Singapore’s shed market is expected to continue to see rising occupancy levels and climbing rents in the near to medium term, according to CBRE’s Ambarchi.
“The Singapore industrial market is off to a strong start for 2023 with a slew of industrial transactions completed in the first quarter,” he said.
Last month, M&G Real Estate completed its purchase of four car showrooms from auto distributor Jardine Cycle & Carriage in a S$333 million deal – also brokered by CBRE – which is estimated to be the largest industrial transaction in Singapore since 2019.
Median rents across Singapore’s industrial sector are projected to grow by 1 to 3 percent this year despite gloomy business sentiment in other areas, according to a report by Knight Frank on Monday.
The property agency reports that median rents for warehouses in the city-state stood at S$1.50 per square foot per month in the first quarter, up slightly from the same period in 2022.
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