Frasers Centrepoint buys 4 business parks in UK
The properties, acquired by Frasers Property International, mark a new market segment for group; subsidiary also enters into conditional agreement to buy 5th UK business park
Singapore
FRASERS Centrepoint Limited (FCL) has agreed to buy four business parks in the United Kingdom from Oaktree Capital Management LP for about £686 million (S$1.2 billion), a move that marks the property group's foray into a new market segment.
On Monday, FCL announced that the acquisition comprises 4.9 million square feet of built area across four freehold business park assets: Winnersh Triangle in Reading, Chineham Park in Basingstoke, Watchmoor Park in Camberley and Hillington Park in Glasgow.
They were acquired by FCL's subsidiary, Frasers Property International Pte Ltd, from subsidiaries of a fund or account managed by Oaktree Capital Management LP. The occupancy rate of the properties is about 85 per cent.
The weighted average lease expiry (Wale) is 5.9 years and aggregate valuation as at Aug 31, 2017 is £692 million. The acquisition will be payable in cash and funded from borrowings and internal resources.
Frasers Property has also entered into a conditional agreement to acquire another business park, Maxis, Bracknell, subject to conditions relating to, among other things, net operating yield, and Maxis achieving an occupancy of at least 95 per cent.
FCL said that the net purchase price for the Maxis acquisition is £57 million and Frasers Property or its nominee(s) intends to satisfy the purchase price in cash, also funded from borrowings and internal resources.
Panote Sirivadhanabhakdi, group CEO of FCL, said the acquisition is in line with the group's strategy to grow overseas presence and recurring income sources.
"The group has been in the UK and Europe for over 15 years, and we now extend our presence from the residential, hospitality, industrial and logistics sectors to include the commercial and business park sector," he said.
Post-acquisition, on a pro forma basis, FCL will have around S$4.2 billion of assets in the UK and Europe, and commercial properties as a proportion of FCL's S$26.8 billion of total assets will increase to around 30 per cent.
"We can also potentially benefit from the 'network effect', given that we are already in the industrial, logistics, commercial and business park sectors in Australia, Germany, the Netherlands, Singapore and Thailand," he added.
On the choice of location for the properties, Mr Sirivadhanabhakdi said the UK has a highly institutionalised and attractive real estate market with a transparent and efficient legal regulatory and tax framework.
"In particular, the UK business park market has demonstrated resilience and continued growth post the Brexit vote. Favourable supply-demand dynamics, driven by desire for integrated lifestyle and community-based business space with a live-work-play proposition, demand for cost-efficient alternatives to city centre locations, and historical low vacancies, make the UK business park sector a very attractive market to further extend our platform."
Derek Tan, DBS Group Research, said FCL's move will ensure the group's growth and expansion of its recurring income base.
"The tenant profile for the target porfolio is diversifed but introduces a new set of tenants to the FCL, given that it's mostly in the Telecom, ICT, Manufacturing, Engineering subsectors. Key clusters that drive occupancy within the business parks are Business Services, Engineering and Technology which we believe to be segments that are continuing to see growth in employment opportunties and increasing prominence to UK's economy going forward. We note that the long dated Wale of 5.9 years offer strong income visibility and defensive cash flows to the group," he said.
FCL closed trading at S$2.12 on Monday, down one Singapore cent, or 0.47 per cent.
