FLCT to divest Cross Street Exchange for S$810.8m

Jan 25, 2022

FRASERS Logistics and Commercial Trust (FLCT) Frasers L&C Tr: BUOU 0%, through its sub-trust Frasers Commercial Trust, will be divesting its remaining leasehold interest in its mixed-use commercial property (see amendment note), Cross Street Exchange, for S$810.8 million.

In a press statement on Tuesday (Jan 25), FLCT's manager said the price tag represents a premium of 28.3 per cent to 18, 20 and 22 Cross Street's book value of S$632 million on Sep 30, 2021.

The net proceeds from the divestment are approximately S$802.7 million, after divestment fees of S$4.1 million and other divestment-related expenses.

The net proceeds of the divestment will be used to fund potential acquisition opportunities, finance capital expenditure, repay existing debt, make distributions to unitholders of FLCT and/or other general corporate requirements.

Following the divestment, FLCT's portfolio weighting towards logistics and industrial will increase to 66.9 per cent, from 61.1 per cent previously.

The transaction is expected to enhance FLCT's portfolio metrics with a higher overall portfolio occupancy rate of 97.1 per cent, up from 96.2 per cent, and a longer weighted average lease expiry (WALE) profile of 5 years, up from 4.8 years.

It will also lower the trust's aggregate leverage to 29.3 per cent from 33.7 per cent on a pro-forma basis, assuming that 49.2 per cent of the net proceeds are used to repay outstanding debt. This will translate to debt headroom of more than S$3.01 billion post divestment, said FLCT's manager.

Robert Wallace, chief executive of the Reit manager, said: "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."

Real estate agent JLL, which advised and managed the sale, said in a separate Tuesday statement that the property comes with approximately 74 years remaining on its 99-year leasehold tenure.

Cross Street Exchange comprises 305,739 square feet (sq ft) of office net leasable area (NLA).

The agent also highlighted that it underwent extensive upgrading works in 2019 to rejuvenate and reposition the property’s retail podium, which comprises 87,109 sq ft of NLA.

“Core Singapore assets remain the preferred investors’ real estate strategies given that the upside fundamentals of the broader market have remained solid throughout 2 years of global uncertainty. This transaction proves that the allure of Central Business District (CBD) office space remains high and that investors also see longer potential in retail opportunities offered in mixed-use developments,” commented Ting Lim, executive director and head of capital markets (Singapore), JLL.

The purchaser is an undisclosed third party. The divestment is expected to be completed on Mar 31, 2022.

In its statement, the manager said its proposed divestment of the non-core leasehold CBD commercial property is in line with its proactive asset management and portfolio rebalancing strategies.

Units of FLCT closed at S$1.43, down 0.69 per cent or S$0.01, on Tuesday.