In a blog post dated 14 October, I said that Cambridge Industrial Trust is worth another look as I expect its income to bump up in 2012 and 2013 without any need for further fund raising. It is interesting to note that subsequently on 1 November, Templeton became a substantial unitholder. Announcement here.
More recently, the Trust has proposed the acquisition of 3C Toh Guan Road East for S$35.5m. This acquisition to be completed in the first quarter of 2012 is to be part funded by debt and the rest by cash.
The acquisition is expected to bump up annual DPU by 0.24c. If the unit price of CIT were to decline to 46c, we would be looking at a prospective annual distribution yield of 9.92%. That could be attractive enough to increase long exposure to the trust.
Is this increase in DPU sustainable? Everything else remaining equal, it is. This is because it is secured through a three years leaseback agreement to the seller of the said property.
Any potential pitfalls. I do see one which is some 10 years away. This is a 30+30 years leasehold property which saw its land lease commencing in 1991. So, it is only 10 years away before the land lease has to be renewed. At what price? We will know then. For the next few years, it should be a productive asset.
See announcement
here.
Related post:
Cambridge Industrial Trust: Worth another look.
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