3 Things That Investors Should Know About This REIT With A 9% Yield

Cache Logistics Trust (SGX: K2LU) is a real estate investment trust that focuses on investing in quality income-producing real estate used for logistics purposes in Asia-Pacific.

Cache’s portfolio comprises 19 logistics warehouse properties strategically located in established clusters in Singapore, Australia and China. The portfolio has a total gross floor area of approximately 7.5 million square feet, valued at approximately S$1.3 billion as at 30 June 2016.

Given its high distribution yield, investors might be interested in knowing more about this REIT. So we will look at three things that investors should know about.

Diversified income base

Cache diversifies two main ways – geography and industry.

Geographically, the trust operates in three regions – Singapore, Australia and China. Though Singapore represents about 92% of total rental, the company is diversifying actively further into overseas markets, especially Australia in 2015.


Source: Company’s presentation

The trust’s customer based is relatively diversified, too, which is illustrated in the chart below.


Source: Company’s presentation

Being diversified is a positive for a REIT since the income will be less volatile as earnings will not be significantly impacted in the event of weaker economic condition in a particular business segment.

Latest quarterly performance

In its latest quarterly summary, which can be found here, gross revenue is up by 30.3% year-on-year whereas net property income is up by 21.9%.

As a result, income available for distribution is up by 6.2%.

The improvement in performance is due to incremental revenue from Australian acquisitions made in FY2015 and from DHL Supply Chain Advanced Regional Centre.

Portfolio occupancy rate is 95.8% with a weighted average lease to expiry of 4.1 years.

REIT manager

Cache logistic trust is managed by ARA-CWT Trust Management (Cache) Limited, a joint venture between ARA Asset Management Limited (SGX: D1R) and CWT Ltd (SGX: C14).

Combining the asset management expertise of ARA and the logistic operational know-how of CWT, the JV should be able to offer reasonably sound management for the long-term development of the trust.

So far, the trust has performed positively, with total asset growing from $855 million in 2011 to $1.326 billion in 2015. The growth is achieved whilst maintaining relatively stable distribution per unit of between 8.3 cents to 8.6 cents in the same period.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.