Frasers Logistics & Industrial Trust (SGX: BUOU), a REIT that specialises in logistics and industrial properties in Australia, Germany, and the Netherlands, announced yesterday that it had acquired a logistics property from its sponsor Frasers Property Limited (SGX: TQ5). Here are 10 key takeaways from the announcement:
1. The asset is a prime logistics property located in Meppel in the Netherlands and its land tenure is freehold. The acquisition increases the total number of properties held by Frasers Logistics & Industrial Trust from 82 to 83.
2. The new property has a gross lettable area (GLA) of 31,013 square metres and construction was just completed a few months ago in May 2018.
3. The new property is fully leased to FrieslandCampina on a 15-year, triple-net lease. A triple-net lease is one where the maintenance, insurance, and property tax on the property are all borne by the tenant. FrieslandCampina is a Dutch multi-national dairy company, and is one of the largest dairy companies in the world.
4. The property has a long weighted average lease expiry (WALE) of 14.9 years. Prior to the deal, Frasers Logistics & Industrial Trust’s portfolio had a WALE of 7.06 years. After the acquisition, the WALE for the REIT’s portfolio has increased to 7.14 years. A longer WALE provides more visibility on the REIT’s leasing revenue and is a positive.
5. The lease also benefits from annual inflation adjustments and the property has an additional plot of land adjacent to the existing facility, which provides for the possibility of future building expansion.
6. The acquisition increases the GLA and value of Frasers Logistics & Industrial Trust’s portfolio to 2.0 million square metres and A$2.9 billion, respectively, as of 30 June 2018.
7. The net property income (NPI) yield of the new property is 5.4%, and is yield-accretive for the REIT’s overall portfolio, meaning that its distribution per unit (“DPU) would be enhanced moving forward.
8. The total estimated cost of the acquisition is €25.1 million, after accounting for the purchase price of €24.8 million, plus all fees related to the deal. The cost of the acquisition will be fully funded from Frasers Logistics & Industrial Trust’s undrawn loan facilities.
9. The DPU for the first nine months of Frasers Logistics & Industrial Trust’s fiscal year ended 30 September 2018 (FY2018) was 5.41 Singapore cents. If we annualize the DPU, we get a full-year DPU of 7.213 Singapore cents, which translates to a forward distribution yield of 7.1% at Frasers Logistics & Industrial Trust’s unit price of S$1.02 as of 31 October 2018.
10. The acquisition looks to be beneficial for Frasers Logistics & Industrial Trust as it is (a) yield accretive and (b) increases the overall WALE of the portfolio, while staying aligned with the REIT’s strategic intention of purchasing good quality industrial assets in both Australia and Europe.
Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!
The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Frasers Logistics & Industrial Trust.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.