Cache Logistics Trust FY 2016 AGM - Notes

The size of the convention hall for Cache AGM has more than doubled since last year! 

CEO presentation:

1. Most of the income for distribution is from operations (90+%) ie. they did not have to come out cash to support DPU. An analyst report last year probably made them emphasize this. 

Link to news on that report: http://news.asiaone.com/news/business/most-reits-dpu-paid-out-operations

2. 63% fixed rate debt. CEO mentioned that since 2013 when rates were expected to rise but eventually did so only much later, Cache has benefited from their higher proportion of floating rate debt (which is pegged to current rate) However going forward they will be more conservative.

3. 51 Alps Ave: Schenker to be resolved by this year. Cache is currently being paid 50% of market rate rent by Schenker, moreover there is no lease now. Cache is fighting to be reimbursed in the shortfall when this is all resolved. This matter has caused a 0.343 cent loss in dpu (after fees)

4. Supply to industrial properties in Singapore is expected to taper off in 2018/19. This year has oversupply still and 10% vacancies in industrial properties at the national level. (Info from URA)

5. One of Cache's competitive strengths is the build-to-suit ability, such as DHL property at Tampines Road. (CEO mentioned he was a practicing architect later)

6. Quality portfolio is also one of Cache's strengths. Good locations for Singapore properties (near airport and sea port)

7. Due to the slowdown in Singapore, they have diversified geographically. Australian properties are freehold with longer WALE and rental increment is possible. Australia is spending on infrastructure benefiting their properties and if commodities pick up, Cache will also benefit.

Q&A:

8. Extremely fiery from the get-go. A unitholder said management was not aligned with unitholders with regard to higher fees and lower DPU. CEO says this was due to fees based on FY2015 AUM. As the fair value of the properties has fallen in FY2016, their fees will drop next fiscal year. Many unitholders followed up on the reduced DPU. Chairman Lim How Teck was very cool about it and managed to inject some humour into the situation. He says another reit pegs fees to DPU but their fees end up higher than Cache (anyone knows which reit is that?) He himself owns 800,000 shares of Cache, so he says he is aligned with unitholders. A lady board member says the fees are in line with MAS regulations, and that the fee structure has not changed since IPO.

9. Later another shareholder said that if you are not happy you can sell since the price bounced back to 87cents. Was expecting more drama from that retort but nothing happened and the atmosphere started to cool down.

10. Proposed takeover of CWT: no indication of how Cache will be affected, but Chairman says ROFR to CWT properties will still be available to Cache.

11. Gearing of 43% is due to the fair value of properties falling. (Gearing ratio = Debt / Assets)

12. CEO says they may divest to clear debts and make new acquisitions if needed.

13. John Lim: Singapore industrial land lease is 30+30 years. As time passes, valuation of the property will fall due to depreciation. Currently there is a "double whammy" situation: falling property yields and falling valuations. Hence the diversification to Australia with longer WALE & freehold lease: this is to balance the portfolio, and doing so will take time. Eventually they plan to increase Australian portfolio to 40%; currently is at 13%. 

14. Property expenses increase with the conversion from master lease to multi lease. Master lease is 'triple net' as master lessee pays the property tax and other regulatory taxes. With multi lease, Cache will pay these taxes but their revenue may be higher (a master lessee gets lower rental due to the larger size of area rented)

15. Green Mark for Properties: Only DHL property has this. Getting qualification for these may not enhance earnings due to the costs involved turning a building 'green' unless perhaps the entire building is air conditioned.

16. Ramp-up buildings use much more space for ancillary (ramps and loading bays) but it is beneficial for multiple tenants. A cargo lift would take far too long unless there is only 1 master tenant.

17. Schenker issue is assured by the manager as a one-off. 

18. Someone asked about the Jinshan warehouse. CEO says that CWT leases that property so they do not put a lot of resources into managing the single property in China.

Vested at average price of $1.08