FCL enters German last-mile logistics sector

Singapore

FRASERS Centrepoint Ltd (FCL) is set to expand its European logistics property footprint with an announcement over the weekend of a purchase of six German logistics facilities for about 257 million euros (S$408.6 million).

The purchase, which will boost the group's proportion of recurring income, also marks the mainboard-listed group's entry into the German last-mile logistics sector.

FCL said its wholly-owned subsidiaries have entered into a sale and purchase agreement with ECE Projektmanagement, a Hamburg-based developer, owner and manager of commercial real estate, for the acquisition of the six cross-dock facilities, which total 75,478 square metres (sq m) of lettable area on 426,439 sq m of land.

"The properties are located in some of Germany's key logistics markets in Heilbronn, Mainz, Berlin, Augsburg, Hamburg and near Leipzig," FCL said in a regulatory filing with the Singapore Exchange.

The cross-dock facilities in each of the six properties are equipped with above-market specifications to meet a wide range of e-commerce and general goods logistics requirements. "Dock-doors have been provided on all four sides of the facilities in each of the properties, which allow a flexible stream of goods within the buildings," FCL said.

Elaborating, an FCL spokesman said that most logistics facilities have only one docking point, which serves as both an entry and exit point. Cross-dock facilities have at least two docking points; and in the case of the six properties that FCL is buying, they each have four docking points. "Goods from trailers enter from one point and go out to end-users via trucks and vans at another point. These facilities typically serve e-commerce users as they facilitate the fast movement of goods - hardly any goods are stored in them."

The six German properties are newly built or are to be built, and are all 100 per cent preleased to Hermes Germany, which is the country's largest private B2C (business to consumer) parcel delivery company, for a term of 15 years. "Hermes has invested substantially in the internal fit-outs of the properties which include customised conveyor belt systems to maximise operational efficiency," FCL said.

The group highlighted the benefits of the acquisition which will include enabling FCL to grow its proportion of recurring income while complementing its current portfolio of European logistics and light industrial properties. The purchase also positions FCL to benefit from e-commerce logistical requirements. "The last-mile logistics sector has demonstrated resilience, with rental and occupancy rates on an uptrend due to strong demand and limited supply."

The acquisition also offers "strong defensive characteristics", FCL said. "The properties are high quality, state-of-the-art and strategically located with excellent connectivity to major cities such as Berlin, Hamburg, Stuttgart, Leipzig and Munich. On a long-term lease to a reputable German logistics company, the properties will contribute stable, recurring income to FCL."

The properties are all located in regional logistics hubs in close proximity to major highways.

The purchase price of roughly 257 million euros for the six properties is a gross sum (including closing costs). The amount payable is subject to adjustments arising from the actual net lettable area (NLA) being higher or lower than the estimated NLA of the properties. The sum was based on a 246.4 million euro total valuation of the properties as at October 2017 by Jones Lang LaSalle SE Germany.

The Augsburg facility, which is currently under construction, and the facilities in Hamburg and Halle (next to Airport Leipzig), which are to be constructed, will be transferred upon their respective completion dates in accordance with the sale and purchase agreement. Completion of acquisition of the six properties is scheduled to take place between Feb 28, 2018, and March 31, 2019.

FCL began acquiring logistics assets in the Netherlands and Germany earlier this year through its purchase of Amsterdam-headquartered Geneba Properties, which has a portfolio of long-lease industrial andlogistics assets in the two countries. Subsequently, FCL announced further acquisitions of German logistics/industrial properties prior to the latest statement.