Frasers Logistics & Commercial Trust (FLCT) is divesting Cross Street Exchange to an unrelated third party for SGD810.8 million.
The consideration represents a 28.3% premium to the property’s book value of SGD632.0 million, said the REIT on 25 January.
The divestment will bring FLCT’s portfolio weighting in the logistics & industrial sector to 66.9% from 61.1% previously.
“The proposed divestment of this non-core leasehold central business district commercial property is in line with the REIT manager’s proactive asset management and portfolio rebalancing strategies, providing opportunities to re-weight FLCT’s portfolio into the logistics and industrial asset class”, said the REIT.
“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”, said Robert Wallace, CEO of the REIT’s manager.
Post-divestment, FLCT’s occupancy rate will be 97.1% from 96.2% presently.
The REIT will also have a longer WALE of 5.0 years, from 4.8 years currently.
The estimated net proceeds from the divestment is approximately SGD802.7 million.
The net divestment proceeds may be used to fund potential acquisition opportunities, finance capital expenditure, repay existing debt, make distributions to FLCT’s unitholders or other general corporate requirements.
Assuming that 49.2% of the net proceeds are used to repay outstanding debt, FLCT’s aggregate leverage is expected to be lowered by 4.4 percentage points from 33.7% to 29.3% on a pro forma basis with debt headroom increased to approximately SGD3,017.2 million post-divestment.
Completion of the proposed divestment is expected to take place on 31 March 2022.
FLCT was last done on the Singapore Exchange (SGX) at SGD1.44, which presently implies a distribution yield of 5.53% according to data on the Singapore REITs table.