FLCT acquires prime UK freehold warehouse facility for £28.3m

FRASERS Logistics & Commercial Trust (FLCT) BUOU : BUOU 0%, through its wholly-owned subsidiary, has acquired a prime freehold warehouse property to be developed at Worcester Six, a new business park in the UK, for an all-in maximum consideration of £28.3 million (S$51.5 million).

In a bourse filing on Tuesday (Nov 30), the real estate investment trust (Reit) manager said that FLCT will fund the development of the new facility. FLCT will be funding the acquisition through internal resources or existing debt facilities, or both.

The property, acquired from an unrelated third party, Stoford (Worcester), is not expected to have any material effect on FLCT's net tangible assets, the Reit manager noted.

It estimates the total cost of acquisition to be around £29.1 million, which includes the acquisition fee as well as professional and other fees and expenses in connection with the acquisition. 

This transaction is a forward-funding arrangement, which enables FLCT to invest in the new Worcester property at a fixed cost, with cash flows managed over the duration of development.

The development of the property is expected to be completed in the first quarter of 2023. Upon completion, the property will be leased to Alliance Flooring Distribution on a new 15-year lease, subject to 5 yearly upward only rent reviews.

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The tenant is a subsidiary of Victoria, an international manufacturer and distributor of innovative flooring products which is listed on the London Stock Exchange with operations spanning across the UK, Europe and Australia. The property will also be the tenant's headquarter flagship warehouse in the UK.

The property, when developed, will be a modern and high quality facility with a total lettable area of 180,121 square feet on a 3.48 hectare site, the Reit manager noted.

"The property is prominently positioned near the entrance to the business park with extensive frontage to the access road. The building will be constructed to high specifications with eaves height of 12.5 metres, 27 loading doors, extensive car parking spaces and a target Energy Performance Certificate rating of A," the Reit manager added.

Chief executive officer of the Reit manager Robert Wallace said that this is the second third-party acquisition by FLCT and scales up the trust's footprint in the "attractive UK logistics real estate space, where demand and take-up levels are expected to remain strong".

"The acquisition through a forward funding agreement for a prime, freehold high-specification facility in the UK is the continuation of our strategy to grow FLCT's core logistics and industrial portfolio in existing markets," he noted.

Wallace added that the proposed acquisition is expected to further enhance FLCT's portfolio metrics while providing unitholders with a stable and long-term income stream.

The manager expects the acquisition to increase FLCT’s exposure to the UK market to 10.9 per cent of its total portfolio value, from 10.2 per cent previously. The weighting of FLCT’s portfolio by value towards logistics and industrial assets will also increase to 61.4 per cent, from 61.1 per cent. 

Units of FLCT closed down 0.7 per cent or S$0.01 at S$1.47, before the announcement was made.

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