Frasers Logistics’ Strategic Acquisition to Boost L&I Portfolio: Key Highlights for Investors

March 19, 2024

Frasers Logistics & Commercial Trust (SGX: BUOU), also known as FLCT, has announced the acquisition of an 89.9% stake in four German logistics and industrial properties from its sponsor, Frasers Property, as part of its strategic move to boost its portfolio. The purchase, valued at €129.5 million, marks a notable pivot towards inorganic growth amidst a challenging global economic landscape.

Here are a few key things to look into for investors looking to invest in FLCT.

Long-term vision to grow its Logistics & Industrial exposure

This acquisition not only expands FLCT’s footprint in key German logistics markets but also signals a strategic enhancement of its asset base, aligning with its long-term vision to augment its logistics and industrial segment exposure. The properties, located in prime logistics hubs including Egelsbach, Saarwellingen, Uberherrn, and Hamburg, boast a 100% occupancy rate, reinforcing FLCT’s operational resilience. Furthermore, this deal is set to enhance FLCT’s portfolio metrics, with a boost to the portfolio occupancy rate to 95.9%, an extension of the weighted average lease expiry (WALE) to 4.4 years, and an increase in logistics and industrial (L&I) exposure to 71.1% of total portfolio value.

Earnings accretive acquisition for FLCT

FLCT’s strategic move to acquire these assets at a discount to their independent valuations underscores the Trust’s adeptness in capitalising on market conditions to unlock value for shareholders. With this acquisition, FLCT not only fortifies its position in the competitive European logistics market but also sets the stage for future growth through strategic asset plays and expansions. The acquisition is structured to be accretive to both Distributable Per Unit (DPU) and Net Asset Value (NAV), promising slight improvements without undermining the Trust’s financial health.

Strong balance sheet with low gearing ratio even post-acquisition

FLCT plans to finance the acquisition entirely through debt, anticipating a manageable uptick in leverage to 32.5% from 30.7%. Despite this increase, FLCT’s significant debt headroom post-acquisition signals strong balance sheet capacity to support future growth initiatives.

Strategic inorganic growth opportunities

Investors and market watchers alike will keenly observe FLCT’s trajectory, as the Trust continues to navigate the complex landscape of global logistics and commercial real estate. As we move forward, FLCT’s focus on strategic inorganic growth, alongside its robust balance sheet, positions it well to seize further opportunities. The Trust’s commitment to growing its L&I exposure, potentially including diversification into data centres, signals a forward-looking approach to portfolio development in developed markets. This acquisition not only showcases FLCT’s strategic agility but also its commitment to delivering value in a challenging environment, making it a standout entity for investors seeking exposure to the logistics and commercial real estate sectors.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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