Deutsche Asset Manager Makes SG’s First Major Logistics Buy of 2020

Deutsche Bank’s asset management arm has acquired a warehouse asset in western Singapore, braving the COVID-19 downturn to make the Southeast Asian financial mecca’s first major logistics acquisition of the year.

DWS, which was formerly known as Deutsche Asset Management, said in an announcement that it had purchased the 403,000 square foot (37,440 square metre) property in Jurong through its Asia core real estate strategy.

The 2012-vintage facility, which comprises a four-storey ramp-up warehouse and ancillary office space, serves as the APAC headquarters for its sole tenant, NYSE-listed 3PL operator XPO Logistics.

The property is understood to have been acquired from a private fund at a price that falls within the S$75 million ($53 million) to S$100 million bracket, according to people familiar with the matter who spoke to Mingtiandi.

Targeting Singapore 3PL Operations

“Given the strength of the asset, location and tenant profile, we expect this acquisition to deliver long term stable cash returns for our investors in line with our Asia core real estate investment strategy,” said DWS’s portfolio manager David Edwards.

Located at 11 Sunview Way, the property has access to the Ayer Rajah Expressway and other arterial roads, connecting it easily with the rest of Singapore, according to DWS.

The asset manager noted in its statement that the warehouse is within 20 minutes of Singapore’s upcoming multi-billion dollar maritime industry centre at Tuas Megaport, which is set to start opening in phases from next year.

Sited in an industrial and logistics area that is also home to several data centres, DWS’ latest Singapore warehouse acquisition is adjacent to Keppel DC REIT’s Kingsland Data Centre at 13 Sunview Way, which the real estate investment trust acquired for S$295 million in 2018.

Logistics Sector Still in Style

DWS has made its logistics bet as overall real estate dealmaking has stalled in Singapore as a result of the COVID-19 pandemic, which helped trigger a 31 percent drop in real estate investment volume in the first three months of this year compared with the last quarter of 2019, according to CBRE.

Despite the downward trend, investment in the industrial and logistics sector – which includes factories, workshops and non-investment grade warehouse assets – rose 27 percent over the same period to S$513 million. Among these deals was Heap Seng Group’s S$88 million purchase of a 54,576 square foot light industrial building for self-use in central Singapore’s Toa Payoh area.

CBRE’s head of industrial and logistics services for Southeast Asia, Rimon Ambarchi, who brokered the deal, said that he expects investment demand for industrial and logistics assets in the city to increase going forward.

“This asset class has proven to provide defensive income-based returns through all market conditions and as such, is highly attractive to long-term investors,” he added.

Despite warehouse rents in Singapore falling 2 percent during the first three months of 2020, Ambarchi said there has been an uptick in activity since the beginning of April, with leasing deals signed at higher-than-expected values, a trend which he sees as mainly driven by tenants seeking extra space for stockpiling as a result of the disruption to supply chains during the pandemic.

DWS’ head of transactions for Southeast Asia, Kian-Fong Lim, pointed to the shift towards e-commerce as a reason for the sector’s resistance to the general slowdown.

“Singapore’s industrial sector has shown resilience in periods of slow growth thanks to growing e-commerce trends and changing demographics,” said Lim, adding that quality logistics assets like 11 Sunview Way continue to attract investor interest.

Notching a Third Shed in 12 Months

DWS’ acquisition, which is its third through its Asia core real estate strategy, follows a pair of APAC logistics acquisitions in 2019.

Last June, the asset manager bought a half stake in a cold storage facility in Australia for A$134.2 million ($87 million) from Frasers Logistics & Industrial Trust.

Located at 99 Sandstone Place in Brisbane, the warehouse is leased to Australian supermarket operator Coles Group.

Two months before that Aussie deal, the asset manager had made an earlier warehouse purchase in Singapore’s Tuas area, buying a 150,000 square foot property at 29 Tuas Bay Drive  leased to oil and gas equipment supplier National Oilwell Varco, for an undisclosed sum.