S-Reits continue to expand through DPU-accretive acquisitions

The combined market value of the Singapore Reits and property trusts (S-Reits) sector has grown at a compound annual rate of 6 per cent over the 10 years to end-2023. As expected, and given the challenging macroeconomic environment since the pandemic, not every year saw growth.

Nevertheless, S-Reits are still expanding their portfolios as we see Reit managers announce proposed acquisitions and developments in the year thus far.

The latest was announced by Frasers Logistics & Commercial Trust : BUOU 0% (FLCT) with the proposed acquisition of 89.9 per cent interest in a logistics and industrial (L&I) portfolio of four properties in Germany. The stake will be purchased from its sponsor, Frasers Property : TQ5 0%, at an agreed property purchase price of 129.5 million euros (S$188.6 million), which is at a discount of 5.3 per cent and 1.1 per cent to the appraised value by Colliers and CBRE, respectively. The properties are fully occupied and leased to tenants, which include multinational corporations such as Schenker, Dachser and Hermes Germany, which are existing tenants within FLCT’s portfolio.

Post acquisition, the proportion of L&I assets in FLCT’s portfolio will increase from 70.3 to 71.1 per cent, and the number of L&I assets in Germany will increase to 33, representing over a quarter of FLCT’s total portfolio value. The German logistics sector is noted to have maintained its resilience with close to record low vacancy rates, and a slowdown in new developments resulting in limited supply in key logistics hotspots which drove rents up by 12 per cent in 2023.

Earlier this month, Digital Core Reit : DCRU 0% (DCReit) proposed to increase its stake in a German data centre by 24.9 per cent for a purchase consideration of 117 million euros. The acquisition will take its stake in the Frankfurt facility to 49.9 per cent and is expected to be about 3.2 per cent accretive to its distribution per unit (DPU).

DCReit notes that the acquisition will improve overall portfolio credit quality by increasing the total annualised rent contribution from investment grade customers from 78 to 87 per cent pro forma. It will also improve its geographic diversification of the portfolio and will reduce the total annualised rent contribution from North America from 82 to 71 per cent pro forma.

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Last month also saw two proposed acquisitions by Mapletree Logistics Trust : M44U 0% (MLT) and CapitaLand India Trust : CY6U 0% (Clint).

MLT announced the proposed acquisitions of three logistics properties – one in Malaysia and two in Vietnam – for a total acquisition cost of about S$234 million. MLT notes that the acquisitions will deepen its network connectivity in these growth markets and position the trust to capitalise on favourable demand drivers for logistics space. The acquisitions will increase MLT’s exposure in Malaysia and Vietnam from 24 to 27 assets and gross floor area will increase by 20.6 and 21 per cent respectively.

Clint announced that it has entered into a forward purchase agreement with Casa Grande Group to acquire three industrial facilities in Chennai, India. The total purchase price is estimated to be 2,680 million rupees (S$43.3 million) and as part of the agreement, Clint will provide funding in three phases and subsequently acquire the facilities upon the completion of each phase.

Clint notes that the acquisition will further diversify its portfolio and grow its industrial presence in Chennai, which is developing into an important hub for electronics component manufacturers in South India. With the proposed acquisition, the floor area of Clint’s industrial, logistics and data centre asset classes as a percentage of its committed pipeline will increase approximately from 12 to 14 per cent.

The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook. Source: SGX Research S-Reits & Property Trusts Chartbook