Daiwa House Logistics Trust Expands Beyond Japan With Buy of Vietnam Cold Chain Asset

Daiwa House Logistics Trust is expanding beyond its home market of Japan with the SGX-listed REIT having agreed to acquire a newly built warehouse near Ho Chi Minh City from its sponsor for VND 483 billion ($20 million).

The trust said in a statement late last week that it is purchasing D Project Tan Duc 2 in Long An province from a unit of Daiwa House for around 3 percent below the average independent valuation for the property of VND 498 billion.

“This is a landmark transaction for DHLT as D Project Tan Duc 2 will be its first property outside of Japan, and we are pleased to deliver a DPU-accretive acquisition to Unitholders,” said Jun Yamamura, chief executive officer of the trust’s manager. “The property is strategically located in a gateway province that connects Ho Chi Minh City, a key economic centre, to the Mekong Delta region, an important aquaculture hub.”

The Vietnam acquisition, which the trust’s manager expects to complete by the second quarter of this year, will also transfer an existing shareholder loan tied to the property in the Tan Duc Industrial Park to the REIT.

Fully Occupied

The deal adds a built-to-suit cold storage facility around an hour’s drive away from Ho Chi Minh City’s District 1 to the REIT’s portfolio, just a few months after the 18,465 square metre (198,756 square foot) shed was completed in September.

The trust’s manager noted that a single tenant has fully leased the warehouse under a 20-year deal.

While the REIT’s manager did not identify the project’s tenant, a March 2022 report on Tan Duc Industrial Park’s website identified the project as being built on behalf of TSE-listed cold chain logistics company Meito Transportation.

Located in the Mekong Delta, the asset is set in an area which yielded around 65 percent of the nation’s aquacultural output in the first 11 months of 2022 and ranks as its leading hub for seafood production with an estimated export turnover of $847 million from January through November of 2022.

In July of this year Japanese developer Sojitz, along with its compatriots at food distribution firm Kobuko Group, announced their own plan to develop a cold chain logistics facility at Tan Duc Industrial Park. Daiwa House will be responsible for building the 36,000 square metre facility on behalf of the Sojitz joint venture, according to a Sojitz announcement.

As the trust’s manager plans to finance the purchase primarily with debt, the REIT’s manager expects the deal to boost the trust’s aggregate leverage to 38.2 percent post-acquisition, from 36.2 percent at the end of September.

“The entry into Vietnam, a growing economy in Southeast Asia, will see a high-quality property added to the existing portfolio of DHLT to further enhance its quality,” said Yamamura.

Vietnam’s GDP grew 5.3 percent in the third quarter compared to the same period a year earlier, according to government data. The International Monetary Fund forecasts that the country will achieve GDP growth of 5.8 percent in 2024 and 6.9 percent in 2025, making Vietnam the fastest growing economy in Southeast Asia.

Based on the asset’s valuation, following the acquisition the Long An warehouse will account for approximately 3.1 percent of the trust’s portfolio, which would then consist of 17 assets appraised at around JPY 90 trillion.

Betting on Vietnam

Daiwa House is selling its Vietnam shed after the Japanese property giant made a series of investments in Vietnam in the past few years, including the December acquisition of a 2,000-unit condominium project in Binh Duong province’s Di An, northeast of Ho Chi Minh City through its Cosmos Initia unit.

In June, the group acquired Singapore-based cold chain logistics firm Storbest Holdings to expand its industrial business in ASEAN.

In December 2022, the group’s Vietnam-based logistics subsidiary launched a warehouse in a BW Industrial development which is located around 20 kilometres from HCMC’s Tan Son Nhat International Airport in Di An.

Units of Daiwa House Logistic Trust were trading for S$0.66 on Tuesday, holding steady with the closing price on the day of the announcement.