Frasers Logistics and Industrial Trust Divests 80 Hartley Street Asset

The manager for Frasers Logistics and Industrial Trust is full of action. After the recent aggressive acquisition of Germany and Netherlands assets, it has recently announced a divestment of one of its Australian asset.

Frasers Logistics and Industrial Trust will be divesting one of its Australian asset (“80 Hartley Street, Smeaton Grange, NSW”) for A$90.5 million (S$90.5 million). The Property was purpose-built for Coles Supermarkets Australia Pty Ltd and will have a remaining lease term of approximately five years, upon extension of the existing lease.

The sale consideration is 40.3% above the book value of the Property of A$64.5 million (approximately S$64.5 million) as at 31 March 2018 and at a 39.2% premium over the original purchase price paid by Frasers Logistics and Industrial Trust of A$65.0 million (approximately S$65.0 million). There will be a divestment fee of A$452,500 paid to manager.

The estimated divestment gain over the book value of the Property is approximately A$17.7 million (approximately S$17.7 million).

Use of Divestment Proceeds

According to the announcement, the proceeds of A$82.2 million (after deduct A$452,500 divestment fee paid to manager) may be used for

  • Distribute to Unitholders and/or
  • Use for funding potential acquisition opportunities
  • Reduce existing debt and/or other general corporate purposes

As per my last analysis on 19th May 2018 ( My Personal Analysis of Frasers Logistics and Industrial Trust ), the gearing ratio for Frasers Logistics Industrial Trust stood at 36.8% after the acquisition of the Germany and Netherlands assets. The gearing ratio is healthy and thus I doubt the sale is intended solely to repay debt but it is possible the manager may use it to reduce the current gearing.

Impact on Distribution Per Unit

The announcement did not indicate what is the impact of the DPU moving forward. However, it used the listing date (“20 June 2016”) of Frasers Logistics and Industrial Trust as an illustration. As what was mentioned, the distribution per unit (“DPU”) of Frasers Logistics and Industrial Trust for the financial period from 20 June 2016 to 30 September 2017 would be reduced by 0.18 Singapore cents to 8.67 Singapore cents. That is an estimated decrease of 2 percent.

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