Frasers Logistics & Industrial Trust - DBS Research 2018-09-03: Asset Recycling At Play

Frasers Logistics & Industrial Trust - DBS Group Research 2018-09-03: Asset Recycling At Play FRASERS LOGISTICS & IND TRUST SGX:BUOU

Frasers Logistics & Industrial Trust - Asset Recycling At Play

  • Proposed acquisition of two properties in Australia for A$62.6m.
  • Young target portfolio with long WALE of 5.7 years offers income visibility.
  • Proceeds from recent divestment in Australia to be re-deployed into higher and sustainable yields.

What’s New

Acquires two properties in Australia

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  • Frasers Logistics & Industrial Trust (FLT) has announced the proposed acquisition of two warehouses in Australia for a combined acquisition price of A$62.6m (all-in cost of A%66.7m). The properties are
    1. 3 Burilda Close, Wetherill Park, New South Wale (NSW) for A$31.5m, and
    2. 103-131 Wayne Goss Drive, Berrinba, Queensland (QLD) for A$31.1m.
  • These properties are located in key industrial markets in New South Wale and Queensland respectively.

Attractive yields of 6.5% supported by a long WALE.

  • The proposed target properties are recently completed and 100% occupied. The properties are c.1 year and anchored by individual tenants on a long weighted average lease expiry (WALE) of 5.7 years.
  • The initial yield of the target acquisitions is 6.5% (6.1% for the NSW property and 6.8% for the QLD property). Respective annual escalations of 3.1% and 3.0% meant that the properties offer a steady organic growth profile for FLT in the medium term. 
  • The vendor has also undertaken to provide incentive reimbursement depending on the actual tenancies at acquisition date.

Asset recycling strategy at play to optimise portfolio yields.

  • The acquistion came on the back of the sale of two properties in Australia for a combined A$99.50m which allows the REIT to reinvest these proceeds into higher-yielding assets with more visible cashflow visibility.
  • Gearing is expected to remain stable at c.36% after the acquisition.

Derek TAN DBS Group Research | Carmen TAY DBS Research | Mervin SONG CFA DBS Research | https://www.dbsvickers.com/ 2018-09-03
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