ARA Logos Logistics Trust to Sell South Australia Warehouse for $32M

Singapore-listed ARA Logos Logistics Trust is slimming its Australian portfolio with the divestment of an ageing warehouse property in a suburb west of Adelaide.

ALOG’s manager announced on Monday that the REIT had entered an agreement for the sale of 404-450 Findon Road in Kidman Park at a consideration of A$41.5 million ($32.3 million).

The 1964-vintage freehold property consists of a cold storage warehouse and ancillary offices, with a gross floor area of 58,795 square metres (632,864 square feet) and a total land area of 119,170 square metres. The buyer is 1835 Capital, an Adelaide-based property developer and investor with a focus on South Australia.

Karen Lee, chief executive of ALOG’s manager, said the proposed divestment is in line with the trust’s strategy to proactively rebalance the portfolio to optimise returns for unitholders.

“With this sale, it will provide us with the financial flexibility to recycle capital and invest in other value-adding properties,” Lee said in a press release. “We may also utilise the proceeds to pare down debt, which will improve ALOG’s debt headroom for potential acquisitions of quality assets or strategic opportunities to unlock further value for the existing portfolio.”

Outlier Cut Loose

The divestment of the Kidman Park property will leave ALOG with 16 Australian assets in its portfolio, in addition to the trust’s 10 assets in Singapore. The South Australia warehouse is isolated geographically from the other 16, each of which is in one of the eastern states of Victoria, New South Wales or Queensland.

The facility sits within two kilometres (1.2 miles) of Adelaide Airport and six kilometres of the city centre. The property includes an undeveloped lot that can be utilised for future development or expansion, according to ALOG’s website.

After taking into account tax and divestment-related expenses, the net proceeds from the sale will amount to roughly A$40.5 million, with ALOG recognising an estimated divestment gain of A$400,000 over the latest book value. The trust had acquired the property for A$57.3 million in December 2015.

The divestment represents about 6 percent of ALOG’s net asset value and net property income and about 3.9 percent of the trust’s market capitalisation.

Offloading Weak Links

ALOG has selectively divested of lower-performing properties with limited growth potential over the last few years, the most recent being ALOG Changi DistriCentre 2.

ALOG’s manager last Thursday entered into an agreement with PGI Holdings to divest of the three-level warehouse at Singapore’s Changi International LogisPark for S$16.7 million ($12.6 million).

The proposed consideration is about 7.7 percent above CBRE’s valuation of S$15.5 million as of 31 December 2020, the manager said in an SGX filing. The trust had acquired the property for S$17.7 million in April 2010.

ALOG has been managed by Sydney-based Logos ever since Singapore’s ARA Asset Management acquired a controlling stake in the Australian developer last year. After adding five Brisbane-area Logos properties last October, the portfolio has a total gross floor area of 9 million square feet with a value of S$1.28 billion.

In January, the manager reported that ALOG’s distribution per unit rose 8.9 percent to 2.927 Singapore cents for the six months ended 31 December 2020.