The deal saw Jollibee [JFC 199.90 2.51%] and its wholly-owned subsidiary, Zenith Foods Corporation, together with purchase 1,564,410,000 common shares of CentralHub Industrial Centers (CentralHub), priced at P1.229142/share, for a total spend of P1.9 billion. CentralHub is a subsidiary of DoubleDragon [DD 10.16 0.20%], and is the entity that DD uses to hold and grow its industrial leasing portfolio of warehouse complexes featuring co-located commissaries, cold storage, and logistics centers. DD and JFC intend to cause CentralHub to “eventually” register as a REIT and hold an IPO sometime in 2022.
When it does, it should be the country’s first industrial REIT, offering investors a chance at owning a slice of the centralized warehouse complex business model that DD has been developing over the past 6 years. JFC’s purchase price was based on CentralHub’s 2020 book value. CentralHub will use the cash to “boost” the development and expansion of its warehouse network ahead of its planned IPO next year.
MB BOTTOM-LINE
Not only will this be the first industrial REIT in the Philippines, but it will be the first REIT that doesn’t lease the majority of its space to BPOs in office towers. That alone makes the potential IPO very interesting to investors. But what about JFC? What’s in this for them? The line near the end of JFC’s disclosure on this deal sums it up rather nicely: “JFC’s investment in [CentralHub] will allow it to focus on growing its core business in food service, restaurant operations, and food processing.” Cold storages and logistics centers are capital intensive businesses (large plots of land, huge facilities, big electricity consumption) that require a great deal of competence and attention to detail to execute correctly.
While not complicated, they’re deceptively tricky to run efficiently, and can quickly become a cost- and time-sink to companies that try to in-house the cold storage and logistics of their perishables. It’s clear that JFC would like to outsource these functions as much as possible, but what’s not entirely clear is how JFC intends to operate with CentralHub going forward. Will CentralHub IPO next year with JFC as its main client, or will JFC simply be a significant, but minor, component of a more balanced portfolio of CentralHub cold storage and logistics clients? Only time will tell, but this move should give JFC some options... provided CentralHub operates up to The Bee’s standards.
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