FRASERS Logistics & Industrial Trust (FLT) is acquiring a new industrial facility in Sydney for A$58.2 million (S$61.78 million) from Frasers Property Australia (FPA), the Australian business unit of Frasers Centrepoint Limited.
This will enlarge its portfolio to 54 properties with a total gross lettable area (GLA) of about 1.2 million square metres (sq m).
On Wednesday, FLT said it has exercised a call option to acquire the newly completed logistics and industrial property in Wetherill Park, Sydney.
The completion of this acquisition would raise FLT's distribution per unit (DPU) for the three months ended Dec 31, 2015 to 1.44 Singapore cents from 1.41 cents on a pro forma basis. This pro forma DPU will rise to 1.47 Singapore cents, if two other acquisitions under the call options exercised in August were also factored in.
"Our strategy to grow our portfolio remains well on track," said Robert Wallace, CEO of the Reit manager, adding that this acquisition will further enhance FLT portfolio's scale, diversity and income streams.
With the acquisition, FLT's portfolio value will be bumped up by 3.5 per cent to A$1.74 billion and its weighted average lease expiry lengthened to seven years from 6.6 years. It will also have a portfolio occupancy of 99.3 per cent, up from 99.2 per cent.
The purchase price is higher than the agreed price of A$57.1 million under the call option agreement to factor in an increase in rent following the installation of a solar panel system and a slightly bigger actual GLA (by 8 sq m) of the completed property. Two valuers Savills and Urbis valued the property at A$58.3-$58.8 million as at Oct 1.
This property has a land tenure of 90 years and its surveyed GLA is 18,848 sq m. Its development was completed on Sept 30.
Located some 45 km from Sydney's central business district, the property is fully leased to Martin-Brower Australia Pty Ltd for a term of 20 years. Martin Brower is one of the top end-to-end supply chain management solutions companies in the US and a key supplier of McDonald's.
"We are delighted to have Martin Brower on board as a key customer of FLT," Mr Wallace said. "This is in line with our strategy to build a broader base of quality customers focused on the highly resilient and growing consumer goods sector."
Martin Brower has been granted development incentives under the various lease agreements with FPA, entitling the tenant to rent reduction for specified periods. FLT's Reit manager said that FPA will fund the rent-free periods granted to the tenant and pay FLT a monthly sum equivalent to the rental income that FLT would have received had such development incentives been taken as cash upfront or tenant fit-out contributions instead.
This acquisition was funded by A$41 million debt, which was drawn down from FLT's five-year revolving credit facility, and some A$20.5 million from FLT's working capital.
Following the acquisition, FLT's aggregate leverage will increase to 29.8 per cent from 28.2 per cent as of Sept 30.
FLT had entered into three separate call option agreements during its June IPO with its sponsor FCL to acquire up to three properties.
The other two call options were exercised in August - one for a freehold property in Melbourne with GLA of 21,660 sq m and the other for a 99-year leasehold property in Brisbane with a GLA of 30,618 sq m. Both are also fully leased.
Separately, there are 11 other properties that FLT's sponsor has granted the Reit right of first refusal (ROFR).
Shares of FLT closed 0.5 cent higher at 92 cents on Wednesday.
Amendment note: In the original story, we referred to FLT's DPU proforma effects to be for the quarter ended Sept 30. It should be for the three months ended Dec 31, 2015. We also mentioned there were nine properties owned by its sponsor under ROFR, which was disclosed in its IPO prospectus. The group has since increased the number of ROFR properties to 11.