Frasers L&C Trust - EU and UK Acquisitions

Just this morning, Frasers Logistics and Commercial Trust (FLCT) announced a proposed acquisition of 6 properties spread across the EU and UK. Just a quick summary and my thoughts here.

Acquisition Targets

Of the 6 properties in question, there are 5 Logistics assets and 1 Office and Business Park. Most of the properties are pretty new (5 properties less than 5 years old), with only one property (Blythe Valley Park) that had completion ranging from 2000 to 2020, likely from staggered developments.

They all sit on freehold land, which is not uncommon in FLCT's existing portfolio already, and have a combined WALE of 9.1 years (shortest being 7.5 years).

Out of the 6, 3 are in Germany, leaving 2 in the UK and 1 in the Netherlands.

Portfolio Shift

Current Portfolio

Post-Acquisition Portfolio

The portfolio composition doesn't shift that much with the new properties. Logistics and Industrial assets still remains the majority, and the geographical rankings all remain the same. This is because the scale of acquisition is not large (S$500+ million compared to existing S$6+ billion portfolio).

This marks the first foray into UK's logistics sector. The Birmingham area, where the new property is located, has an industrial market growth forecast of 3.1% p.a. for the next 5 years.

Portfolio Impact

WALE to go up 6.4% to 5 years.

Occupancy Rate stagnant at 96.8%.

Portfolio value up 8.7% to S$6,847 million.

Funding

The manager intends to fund this set of acquisitions through a mix of debt and equity (Private Placement). The Private Placement would price roughly 220 million new units at between $1.363 and 1.399, raising approximately $300 million. 

Financial Impact

DPU up 1.8% to 3.868 cents.

NAV up 0.9% to S$1.15.

Gearing up 0.7% to 36.2%.

Advanced Distribution declared at roughly 1.308 cents.

My Thoughts

I like that with just a small increase in gearing, the Manager has squeezed out decent DPU and NAV increments, which are both metrics that investors focus on. The acquisition is small and targeted, unlike MINT's recent DC purchases.

I think both approaches are fine, and have different focus in mind. FLCT is looking at strengthening and reinforcing their current strategy, hence a better trade off between gearing and DPU. MINT "spent" the gearing pivoting to a DC majority portfolio, and hence only provided a small DPU increment relative to the amount of debt and gearing.

FLCT has a decent track record in portfolio management. It's DPU has been adversely affect in recent years by exchange rate fluctuations (it's basically an overseas REIT now), but that seems to be improving in recent times.

It's good to see the new additions mainly in Logistics. I let go of the REIT some time back due to the merger and influx of Commercial properties, which I'm not too big a fan of. If I were still a unitholder, I'd be quite happy with this deal!

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Cheers,

InvestingNugget

Author's note:

At the point of writing, I am not a shareholder of FLCT. I have put in my best effort to ensure that the facts are accurate, but I do not guarantee it. Opinions are my own and do not constitute any recommendations.