Its partners in this project are its sponsor, UIB Holdings (1.38%), Fraxtor UIB Konan (50.1%) and a Tokyo-listed corporation with 24.26%.
With its interest of 24.26%, UIBREIT's effective total investment value will be $20.8 million and capital commitment of $7.3 million. Upon completion by 2QFY2027, the property will be managed by UI Japan, the sponsor’s wholly owned subsidiary.
The project is adjacent to UIB Konan Phase 2, which the REIT already owns, creating operational synergies.
The area benefits from strong logistics demand and low vacancy rates due to its position as a key overland gateway connecting Osaka and Nagoya - two of Japan’s largest metropolitan regions.
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According to Koh, the project is aligned with UIBREIT’s strategy of pursuing selective value-accretive and risk-mitigated development projects.
"By investing at the development stage, UIBREIT was able to capture development margins with an estimated yield on cost of 4.8%, which compares favourably with its projected Japan portfolio yield of 3.6%," he says.
From Koh's perspective, this is a relatively small investment with portfolio AUM expanding marginally by only 1.1%, and its aggregate leverage is expected to increase by 0.7ppt to 38.6% upon completion of the development projects anticipated in 2Q27.
Under terms of this development, UIBREIT has an option to acquire the remaining 75.74% interest at a yield of 4% after the two logistics facilities are completed, which gives it the flexibility to deepen its long-term exposure into this region.
According to Koh, UIB Konan Phase 3 can help capture spillover demand from 3PL logistics providers and manufacturers operating in the vicinity and existing tenants currently housed at UIB Konan Phase 1 and Phase 2.
The development is poised to secure pre-commitment of 70% from three potential tenants. At UIB Konan Phase 2, occupancy has improved by 4ppt to 81% and the REIT is aiming for 90% by June.
Despite this overseas commitment, Koh points out that UIBREIT is keeping its primary focus on Singapore, which accounted for 70.4% of portfolio AUM post-transaction, while exposure to Japan expanded by 0.8ppt to 29.6% of portfolio AUM.
Meanwhile, UIBREIT will have a pipeline of other co-developments including a built-to-suit project in Singapore.According to Koh, there are value-accretive AEI opportunities such as the $3 million conversion of AUMOVIO Building Phase 3 at Boon Keng Road from a single-tenanted property to a multi-tenanted property.
Koh, estimating that UIBREIT provides an attractive DPU yield of 8.1% for FY2027, is keeping his "buy" call and $1.16 target price.
UI Boustead REIT, as at 10.52 am, traded at 83.5 cents. It was listed at 88 cents last month.
