A unit of HNA Group has agreed to sell a set of five Singapore warehouses to Mapletree Logistics Trust for S$730 million ($535 million) less than seven months after acquiring the assets, according to an announcement by Mapletree on July 5th.
The embattled Chinese conglomerate’s CWT International is selling the 3.2 million square feet (297,000 square metres) of warehouse space at a 3.3 percent discount to their valuation, as it continues to unwind a set of cross-border acquisitions that had saddled HNA with some $100 billion in debt.
HNA Pain Becomes Mapletree Gain
“This acquisition will strengthen MLT’s position as one of the largest modern-specs warehouse space providers in Singapore,” Ng Kiat, chief executive of Mapletree Logistics Trust Management said in a statement. “Total gross floor area in our Singapore portfolio will increase by almost 20 per cent to over 20 million square feet, allowing us to benefit from Singapore’s continued growth as a global logistics hub.”
HNA had taken possession of the warehouse assets last December as part of its $1 billion acquisition of Singaporean logistics and commodities company CWT Group last year.
While HNA gets $535 million in cash, Mapletree Logistics Trust gets long-term tenancy for its new assets, with CWT agreeing to lease-back the assets from the listed trust as part of the sale agreement. The warehouses carry weighted average leases of 8.7 years and are projected to earn Mapletree’s unit holders an initial net yield of around 6.2 percent. The transaction is expected to complete by September.
Selling Off the Last of 2017’s Acquisitions
Just shortly after the ink was dry on HNA’s acquistion of CWT, the Chinese conglomerate’s firesales began. Since the beginning of this year, HNA has unloaded $2 billion of land in Hong Kong, an office tower in Sydney for $166 million, Spain’s NH Hotels for $719 million and stakes in Hilton Worldwide, Deutsche Bank, 245 Park Ave and Park Hotels and Resorts.
In early July, it was reported that HNA was seeking a loan against a property on the Peak, House 6 at Twelve Peak. The mainland firm had purchased the property in 2015 for HK$506 million ($64 million) , making it one of the most expensive houses on a square foot basis in Asia if not the world.
HNA is struggling under debt that may have been as high as $100 billion after storming the sector and piling on assets over a frenetic three-year period.
Mapletree Gets Multilevel Singapore Sheds at a Discount
The five properties are ramp-up warehouses located in three well-situated clusters in Singapore, according to MLT. Included in the deal is a 600,301 square foot GFA, six-storey structure at 5A Toh Guan Road East, which is close to the PSA International terminals and Jurong Port. Another asset is a seven-storey, 638,777 square foot GFA temperature-controlled warehouse at 6 Fishery Port Road, also near the PSA International as well as the Fishery Port. The other three warehouses are in the Pandan area.
The properties are being purchased by MLT at a 3.3 percent discount to an independent valuation completed by Colliers International in June. They are under lease to the seller for periods ranging from five to 10 years and will generate an initial Net Property Income (NPI) yield of 6.1 percent.
The deal significantly alters MLTs portfolio. After the transaction, the five HNA warehouses will generate 9.5 percent of MLT’s gross revenue. The next largest contributor will be Wesfarmer’s Group in Australia, at 3.2 percent of MLT’s post-transaction revenue.
The transaction also increases the company’s exposure to Singapore. Before the acquisition, MLT generated 34.5 percent of its total revenue in the country. After the acquisition, that number will increase to 41.4 percent. The next largest jurisdiction for revenue is Hong Kong, at an estimated 21.9 percent post acquisition. Following the deal, which will be completed in September, total assets under management for MLT will reach S$7.6 billion.