The manager of Frasers Logistics & Commercial Trust (FLCT), on Jan 24, announced that it has divested Cross Street Exchange to SCC Straits, an unrelated third-party purchaser for a consideration of $810.8 million.
The consideration amount represents a 28.3% premium to the leasehold property’s book value of $632.0 million as at Sept 30, 2021, and will be paid in cash.
After the deduction of the total divestment cost, the REIT will net total proceeds of $802.7 million, resulting in a net gain of $170.7 million.
The sale and purchase agreement (SPA) was made by its wholly-owned sub-trust, Frasers Commercial Trust.
Cross Street Exchange is formerly known as China Square Central, and is located at 18, 20 and 22 Cross Street in the Central Business District (CBD).
The proposed divestment is in line with the manager’s asset management and portfolio rebalancing strategies.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
According to the manager, it will also unlock value for unitholders at the “optimal stage of [the property’s] lifecycle”.
Following the completion of the divestment, FLCT’s portfolio’s weighting towards the logistics and industrial sector will increase to 66.9% from 61.1%.
The proposed divestment will also enhance FLCT’s portfolio metrics, with a higher overall portfolio occupancy rate of 97.1% from 96.2%. Furthermore, the REIT’s properties will now have a longer weighted average lease expiry profile (WALE) of 5.0 years, from 4.8 years previously.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
On a pro forma basis for the FY2021 ended Sept 30, the proposed divestment will raise FLCT’s total net asset value (NAV) to $4.75 billion from $4.57 billion, translating to a raised NAV per unit of $1.29 from $1.24.
FY2021 DPU on a pro forma basis will, however, be lowered to 7.33 cents from 7.68 cents. Distributable income for the period will stand at $257.6 million, down from $270.1 million, assuming 49.2% of the divestment net proceeds will be used to repay outstanding borrowings on Oct 1, 2020.
FLCT’s total leverage is expected to be lowered by 4.4 percentage points to 29.3% on a pro forma basis assuming that 49.2% of the proceeds will go to repaying the REIT’s outstanding debt.
“The divestment of Cross Street Exchange is transacted at an attractive premium over its book value, re-weighting our portfolio towards logistics and industrial properties. The divestment will enhance our portfolio metrics with a higher overall portfolio occupancy rate and longer WALE and will provide FLCT with significant financial strength and flexibility,” says Robert Wallace, CEO of the manager.
The proposed divestment is expected to be completed on March 31.
As at 9.23am, units in FLCT are trading 1 cent higher or 0.69% up at $1.45.
Photo of the former China Square Central (now Cross Street Exchange): The Edge Singapore
