FLT to buy seven Aussie properties for $175m

The seven industrial properties in Australia that FLT is buying include 17 Hudson Court, which is still under development, in Melbourne. The property's key tenant is Clifford Hallam Healthcare, or CH2.
The seven industrial properties in Australia that FLT is buying include 17 Hudson Court, which is still under development, in Melbourne. The property's key tenant is Clifford Hallam Healthcare, or CH2.PHOTO: FRASERS LOGISTICS & INDUSTRIAL TRUST

Industrial assets its first portfolio acquisition since listing last year

Frasers Logistics & Industrial Trust (FLT) is buying seven industrial assets in Australia for A$169.3 million (S$175 million) - its first portfolio acquisition since it listed in Singapore in the middle of last year.

The properties in Australia's three largest industrial and logistics markets - Sydney, Melbourne and Brisbane - have an average age of 2.4 years as at March 31, trust manager Frasers Logistics & Industrial Asset Management said yesterday.

The real estate investment trust (Reit) is acquiring the assets from Frasers Property Australia, a division of FLT's sponsor, Frasers Centrepoint.

"It has been about 12 months since our IPO. Our messaging to the market has been that we would look to grow by about A$100 million to A$200 million per year, and we see this as being consistent with the messaging," noted Mr Robert Wallace, chief executive of the Reit manager.

The proposed deal comprises four completed properties - two each in Sydney and Melbourne - and three that are under development: two in Melbourne and one in Brisbane.

Mr Wallace added that the acquisition will add further diversity to its tenant base and increase rental contributions from consumer-sector tenants.

The new properties are also underpinned by long leases with a weighted average lease expiry of 9.6 years, which FLT said will provide income stability and resilience. This will help improve FLT's lease expiry profile, reducing the percentage of leases expiring in the next two years.

Expiring leases will be down from 3.6 per cent to 3.3 per cent for the year ending Sept 30, 2018, and from 14.9 per cent to 13.7 per cent for the 12 months to Sept 30, 2019.

"I call these firmer yielding assets compared with the existing portfolio because they are long leases... What tends to happen in Australia is that the longer the lease, the firmer the yield; also the fact that these are modern assets," Mr Wallace told a briefing yesterday.

The net property income yield for the seven assets will be about 6.4 per cent, he added.

FLT said the new properties are 100 per cent leased or pre-committed to incoming tenants, which include major consumer and logistics industry players such as Stanley Black & Decker, Clifford Hallam Healthcare, Beaulieu Carpets, CEVA Tech, Yusen Logistics and Ecolab.

The deal will boost the number of properties in FLT's portfolio to 61, with a total value of about A$1.91 billion - up 9.7 per cent from A$1.74 billion now.

The gross lettable area will jump 10.1 per cent to about 1.35 million sq m from about 1.23 million sq m.

Mr Wallace is upbeat on the business outlook, citing "good fundamentals in supply and demand" in the Australian industrial property markets, particularly in Sydney, Melbourne and Brisbane.

Funding of the proposed acquisition may be entirely through bank borrowings, or via a mix of bank borrowings and equity, FLT said.

The deal is subject to unit holders' approval at an extraordinary general meeting to be held next month.

FLT units closed 1.5 cents higher at $1.035 yesterday, after the announcement was released.

A version of this article appeared in the print edition of The Straits Times on June 07, 2017, with the headline 'FLT to buy seven Aussie properties for $175m'. Print Edition | Subscribe