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Frasers L&C Trust to sell stake in facility, buy two properties from sponsor; Q3 revenue doubles

Maxis Business Park, Bracknell, Thames Valley, United Kingdom.png
The UK business park has an estimated purchase price of £37.7 million (S$67.7 million).

75-79 Canterbury Road, Braeside, Victoria, Australia_1.jpg
The Australian logistics property has a purchase price of about A$22.5 million (S$22.2 million) under the proposed deal.

FRASERS Logistics & Commercial Trust (FLCT) is looking to acquire two properties in Australia and the UK from its sponsor Frasers Property as well as sell its remaining half stake in a cold storage facility in Australia, said the trust's manager, which has also released its latest business update indicating that the coronavirus pandemic has not had a material impact on FLCT's portfolio.

In a bourse filing late Monday night, the manager announced that FLCT has proposed to acquire a logistics property in the Australian state of Victoria as well as a business park in Thames Valley in the UK for a total of about S$89.9 million in cash, from Frasers Property.

Both freehold properties are fully occupied, and the acquisitions are targeted to be completed by September 2020.

FLCT's manager intends to finance the total transaction cost through internal resources and/or existing debt facilities.

Frasers Property said in a separate announcement that the proposed divestments are in line with the group's strategy to recycle capital from stabilised investment properties via its real estate investment trusts (Reits). "This enables the group to both optimise capital productivity and support the growth of its Reits," the sponsor added.

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Meanwhile, FLCT's manager noted that the logistics property is "well located" in south-eastern Melbourne within the established Braeside Industrial Estate which is popular for both occupiers and investors due to strong market fundamentals, low vacancy levels and limited supply. The UK business park is also "strategically" located in the largest regional economy outside of London and in a high-tech region in the UK, the manager said.

In addition, the proposed transactions are expected to be accretive and will contribute to stable and regular distributions to FLCT's unitholders, the manager added.

The UK property, named Maxis Business Park, is situated along Western Road, Bracknell. The estimated purchase price for this property is £37.7 million (S$67.7 million), which is the sum of a share consideration of about £18.6 million and a loan consideration of £19.1 million.

The Australian logistics property is located at 75-79 Canterbury Road, Braeside in Victoria. Its purchase price is about A$22.5 million (S$22.2 million) under the proposed deal.

Frasers Property's subsidiary on Monday inked an asset sale and purchase agreement with FLCT for the Australian property. As for the UK property, Frasers Property Holdco (Jersey) 2 entered into a share purchase agreement with parties including a subsidiary of FLCT's trustee, to divest its entire equity interests in the company which wholly owns the business park.

Separately, FLCT is planning to sell its remaining 50 per cent interest in a cold storage facility at 99 Sandstone Place in Queensland, Australia for A$152.5 million.

The facility's existing co-owner, which is managed by DWS Investments Australia, has signed a contract of sale with the trustee of a FLCT sub-trust.

This property comprises a cross-dock, regional distribution facility with 3,285 square metres (sq m) of office accommodation and 50,960 sq m of cold storage and ancillary warehousing. It accounted for about 1.9 per cent of FLCT's total portfolio gross rental income as at June 30.

FLCT had acquired the property as part of its initial public offering portfolio in June 2016, before selling the initial 50 per cent ownership in July 2019 for A$134.2 million to the existing co-owner.

Its manager pointed out that the latest proposed sale price of A$152.5 million is at a 12.2 per cent premium to the A$135.9 million book value of the property as at June 30, 2020, and is also 13.6 per cent higher than last year's sale price for the first half stake.

The divestment is targeted to be completed by December 2020.

Meanwhile, in a quarterly business update on Monday night, the manager also reported that FLCT's revenue nearly doubled to S$103.7 million for the three months ended June 30, 2020, from S$54.1 million a year ago.

"To date, the FLCT portfolio has not been materially impacted by the Covid-19 pandemic. However, the situation remains dynamic with ongoing uncertainty as to the impact it may have on the countries FLCT has a presence in," the manager said.

Adjusted net property income increased 77 per cent on the year to S$78 million from S$44.1 million, while distributable income grew 83.5 per cent to S$61.1 million from S$33.3 million.

Portfolio performance was stable during the quarter and there was proactive lease management, with new leases and renewals amounting to 134,669 square metres of space or 5.2 per cent of the Reit's lettable area. FLCT's occupancy rate stood at 97.2 per cent, and the weighted average lease expiry was 5.2 years.

As at 10.19am on Tuesday, Frasers Property shares were down S$0.01 or 0.9 per cent to S$1.15, while FLCT gained S$0.04 or 3 per cent to S$1.36.

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