Chairman and CEO’s Message

Extracted from Annual Report 2018

Dear Unitholders,

"Acquisitions and divestments over the past few years demonstrate the success of Cache's portfolio rebalancing and growth strategy where capital was recycled from lesser-performing assets into good quality, income-producing freehold properties in Australia to generate stable, long-term sustainable earnings for Unitholders."

On behalf of the Board of Directors of the Manager ("Board"), we are pleased to present the Cache Logistics Trust Annual Report 2018 for the financial year ended 31 December 2018 ("FY2018").

FY2018 was a fulfilling year. We divested two assets in Singapore and China, and expanded further in Australia with the acquisition of nine logistics warehouses. This is the first year in which the number of warehouses in Australia outnumbers that in Singapore. Our rebalancing and growth strategy commenced in 2015 with our expansion into Australia. This has allowed us to reap the benefits of the diversification by demonstrating income and capital growth and to mitigate the lacklustre industrial property market in our core market, Singapore, over the past few years.


2018 was a year where investors' heightened sensitivity to risks arising from a protracted period of geopolitical challenges, concerns over tightened monetary conditions and the US-China trade war.

The International Monetary Fund ("IMF") has downgraded its global economic growth forecast to 3.5% and 3.6% for 2019 and 2020 respectively due to weakness in Europe and some emerging markets. The IMF's second downgrade in three months reflects the level of global uncertainty1. The US Federal Reserve has raised interest rates four times in 2018 to a range of 2.25% to 2.50%, although the market expects fewer hikes in 2019.

In Singapore, the economy grew by 3.2% for the whole of 20182, down from 2017's 3.9%, mainly driven by a strong manufacturing sector. Despite a slowdown in the Purchasing Manager Index ("PMI") reading in 2018, the PMI posted its 28th month of consecutive expansion.

Australia has enjoyed a sustained long-term economic growth, recording 27 consecutive years of positive economic activity. Gross Domestic Product ("GDP") in 2018 was just above 3.0%, above the 10-year annual average of 2.6%, and is expected to remain above 3.0% to 20203. The Reserve Bank of Australia kept the cash rate unchanged at 1.5%.


Despite the challenging operating environment in Singapore, Cache delivered a set of stable financial results.

FY2018 Gross Revenue increased by 8.6% to S$121.5 million, mainly attributable to the incremental contribution from the nine-property Australia portfolio acquired in February 2018 offset by a weaker contribution from the Singapore portfolio. NPI rose by 4.2% to S$90.9 million over the corresponding period last year, driven by a strong 60.8% growth in NPI from the Australia portfolio.

Distributable Income in FY2018 was S$63.4 million, a decrease of S$2.6 million, or 3.9% lower compared to the previous year, after factoring in distribution to Perpetual Security Holders of approximately S$5.0 million and a withholding tax of S$0.8 million from the divestment of Jinshan Chemical Warehouse in China. In addition, a retention sum of S$2.7 million (net of relevant expenses) relating to the unresolved tax matter at 51 Alps Avenue, Singapore, has been accumulated to date4. Excluding the effects of capital distributions and including the reimbursement of outstanding lease incentives from certain Australia properties (paid in the form of capital), the distributable amount to Unitholders would have decreased by 2.2% y-o-y to S$63.0 million, as compared to 3.9%. DPU for the full year was 5.903 cents.

Cache maintained a resilient operating performance in FY2018. As at 31 December 2018, Cache's portfolio committed occupancy remained strong at 95.0% and the portfolio weighted average lease to expiry ("WALE") by NLA was 3.2 years. As a result of the team's proactive leasing strategy, over 1.3 million square feet of leases were secured in FY2018. The portfolio experienced a negative rental reversion of 4.5%, owing to a soft industrial rental market in Singapore.

Underpinned by a strong tenant base, the lease expiry profile as at end-December 2018 was well-staggered. Cache's tenants/end-users comprise largely multinational third-party logistics service providers ("3PLs") and companies from diverse business sectors ranging from industrial and consumer goods to food and cold storage, materials, engineering, construction, healthcare and e-commerce.

As at 31 December 2018, the appraised value of Cache's 26 investment properties was S$1,269.0 million, an increase from S$1,206.9 million a year ago. The increase was attributable to an enlarged portfolio in Australia as a result of the nine-property portfolio acquisition in February 2018 and despite the divestment of two properties during the financial year, namely, Hi-Speed Logistics Centre located at 40 Alps Avenue, Singapore and Jinshan Chemical Warehouse in Shanghai, China.


Cache remains focused on maintaining a prudent capital structure while pursuing long-term sustainable growth in earnings over time.

The balance sheet remains healthy with the aggregate leverage ratio at 36.2% as at 31 December 2018. The average all-in cost of financing in FY2018 was 3.71%.

To further increase its financial flexibility, Cache successfully refinanced part of its Singapore-dollar borrowings into a new 5.5-year S$265.0 million unsecured debt facility comprising a S$200.0 million term loan and a committed revolving credit facility of S$65.0 million in the final quarter of the year. Post refinancing, 84.3% of Cache's total borrowings is unsecured and 87.4% of its portfolio is unencumbered, with the Singapore portfolio entirely unencumbered. The average debt maturity was also extended to 3.9 years as at 31 December 2018.

As added financial flexibility, Cache established a S$1.0 billion multi-currency debt issuance programme in November 2017. With the programme in place, Cache subsequently issued S$100.0 million subordinated perpetual securities in 1Q FY2018.

Cache maintains a relatively strong hedging profile to mitigate the impact of interest rate fluctuations on its distribution income. Approximately 75.2% of Cache's total borrowings has been hedged into fixed rates as at 31 December 2018. In addition, Cache has a minimal exposure to foreign currency risk in terms of its earnings as approximately 88.2% of Cache's distributable income was hedged into or was derived in Singapore dollars.


Cache has progressed its Portfolio Rebalancing and Growth Strategy established in 2015, which targets to proactively recycle capital through strategic divestments and disciplined acquisitions of properties that contribute to sustainable long-term earnings and asset values.

During the year, Cache successfully divested Hi-Speed Logistics Centre, located at 40 Alps Avenue in Singapore, for S$73.8 million in May 2018 and Jinshan Chemical Warehouse in Shanghai, China for RMB87.0 million in December 2018. Hi-Speed Logistics Centre was divested at a 7.0% gain over the last appraised value of the property, while Jinshan Chemical Warehouse fetched a 22.5% premium over its original purchase price.

Acquisitions and divestments over the past few years demonstrate the success of Cache's Portfolio Rebalancing and Growth Strategy, where capital continues to be recycled from lesser-performing assets into good quality, income-producing freehold assets in Australia to generate stable, long-term sustainable earnings for Unitholders.

Since its first entry into Australia in 2015 with the acquisition of six high-quality logistics warehouses, Cache has expanded further in the country. It acquired another logistics warehouse in Laverton North, Victoria in March 2017. In FY2018, it further acquired a nine-property portfolio in Australia for A$177.6 million. Cache currently owns and manages 16 logistics warehouses in Australia, outnumbering that of the Singapore portfolio.

Australia remains an attractive investment market, offering the benefits of freehold land tenure, longer tenant WALE and strong investment covenants. Aside from the benefits of income and geographical diversification, the acquisitions further enhance Cache's base of high quality logistics tenants and end-users. The Australia portfolio contributed 23.6% of total FY2018 gross revenue.

With an expanded footprint in Australia, Cache continues to further strengthen its portfolio with more freehold properties. As at 31 December 2018, the portfolio comprised 37.2% of freehold properties by GFA, up from 22.2% as at 31 December 2017.


Cache is honoured to have received two awards in FY2018 for its commitment and relentless pursuit of strong corporate governance and investor relations. Cache capped the year with two awards, the Bronze award in Best Investor Relations (REITs and Business Trusts) at the Singapore Corporate Awards 2018 and the Gold award in the Industrial REITs (Singapore) (Less than USD1 billion in market capitalisation) category at the Asia Pacific Best of the Breeds REITs AwardsTM 2018.

The Manager would like to express its sincere appreciation for the support received from Unitholders, the media and the investment community in both awards.


The Board firmly believes that a strong environmental, social and governance ("ESG") performance is critical to Cache's long-term performance.

On 2 January 2019, Cache and Sembcorp Industries announced the signing of a power purchase agreement for the installation and operation of rooftop solar farms at three of Cache's warehouses in Singapore, with Commodity Hub housing Singapore's largest rooftop solar facility to date. When fully installed by mid-2019, this clean energy initiative will produce over 9,400 megawatt hours of power annually, enough renewable energy to power more than 2,000 four-room HDB flats in a single year. The green project is beneficial in that it not only takes advantage of under-utilised rooftop space in Cache's warehouses and reduces operating costs, but more importantly, reduces its carbon footprint. More details will be available in the sustainability report which will be published online during the year.


The global economy remains uncertain as rising trade tensions and geopolitics continue to weigh in. According to the MTI, the Singapore economy is expected to grow between 1.5% and 3.5% in 2019. The Australia economy is expected to continue to record robust GDP growth of above 3.0% to 2020, buoyed by low interest rates and a weak local currency. The country is also set to benefit from a record infrastructure investment by the government, which is positive for the logistics industry.

Looking ahead, the Manager remains focused on proactive lease management to maintain high occupancy and optimise overall returns. It will also continue to drive long-term sustainable growth in earnings and asset values through strategic divestments and disciplined acquisitions of freehold assets via its Portfolio Rebalancing and Growth Strategy.


As part of the board's renewal process, Mr John Lim and Mr Moses K. Song, both Non-Executive Directors of the Manager, resigned from the Board on 1 January 2019. Mr Lim Ah Doo, Lead Independent Non-Executive Director and Chairman of the Audit Committee and Ms Stefanie Yuen Thio, Independent Non-Executive Director, retired from the Board on 15 March 2019 after nine years. The Board of Directors expresses its sincere appreciation for their dedicated service and contributions.

Mr Oh Eng Lock, formerly the Group CEO and Executive Director of BreadTalk Group Limited, and who brings with him vast experience in management and financial markets, has been appointed as an Independent Non-Executive Director and Member of the Audit Committee of the Manager with effect from 15 March 2019. The Board welcomes Mr Oh and looks forward to working closely with him on guiding Cache forward in its growth journey.

Our appreciation also goes out to the entire Board of Directors for their wise counsel and stewardship. We would also like to thank the management team for their hard work and commitment. Finally, we would like to express our gratitude to Unitholders, tenants, the investment community and business associates for their continued support.

Lim How Teck

Daniel Cerf
Chief Executive Officer

  1. IMF, World Economic Outlook Update, January 2019.
  2. Ministry of Trade and Industry (MTI), Press Release, "MTI Maintains 2019 Growth Forecast at 1.5 to 3.5 Per Cent", 15 February 2019.
  3. Deloitte Access Economics Business Outlook.
  4. A relevant sum of S$8.2 million, including costs and rental top-up was paid to Cache in October 2017 in association with the amicable resolution of the 51 Alps Avenue, Singapore lease dispute. A sum of S$2.7 million has been retained to date, pending resolution of the appropriate tax treatment with the Singapore tax authorities.