Monday, April 23, 2018

Frasers Logistics Trust (FLT) Ventures Into Germany and Dutch Acquisitions

At around this time last year, FLT makes 7 Aussie assets acquisition and added them into their portfolio of the logistics predominantly located in parts of Australia.

This time round, they've gone a lot bigger by deciding to acquire 21 industrial properties, comprising of 17 properties in Germany and 4 properties in Netherlands which has a predominantly freehold land tenure.

The appraised value for these properties is valued at S$984.4m by independent valuers, and the agreed purchase price is at S$972.8m. This represents approximately 1.2% discount to the appraised value of the properties.

After deducting for the liabilities and debt facilities of the holding company, the purchase consideration after net is approximately around $515.4m. This is the amount that FLT has to come up with to acquire the 21 assets.



Assets Portfolio

The assets are spread across the different cities of Germany and Netherlands, with predominantly in Frankfurt, Stuttgart and Munich.

Majority of the land tenure are freehold in nature and this is common in what we see in Europe based on our understanding from Ireit and Hobee.



The properties are leased with 93% occupancy with an average WALE of 8 years. This increases the WALE of the portfolio from the current 6.4 years to 7.1 years based on post-acquisition.

I find the acquisition and properties solid because the Gross Initial and Net Yield for both the German and Netherlands properties are higher than the market prime yield in general.


This together with the NPI linked leases and long WALE I think bodes well for the acquisition.

DPU Accretive

The goal is to make the acquisitions accretive so both management and unitholders are happy with the situation.

I can see why some unitholders are sad that the yield accretive are only marginally higher in nature but this is what good management should be doing - to grow the AUM of the portfolio and at the same time marginally increasing the DPU while at the very same time protecting the balance sheet of the company.

If the company wants, they could have take this up through all the debts and we can have a higher DPU but it'll be bad for longer term.




Financial Modeling

We know that the company has initiated an EGM on the 5th May to pass on the few proposed resolution before they can come up with the pricing on the preferential offering/rights issue.

The fact that they are only making this marginally yield accretive makes things easier for the management from the financial modeling point of view.

First, we know that the company needs to come up with S$515.4m worth of cash consideration for the purchase of the 21 properties net adjusted for liabilities, while the rest would be funded via inter-company loan agreement between the two SPVs.



Given FLT is trading at a premium to their NAV right now, it is more appropriate for the company to issue the financing via the equity since it also allows unitholders to participate in the growth.

The most likely scenario is a private rights issue for a 1 for 3 at a price for $1, which would yield the acquisitions slightly accretive. The good thing is we are far away from 94 cents so it is unlikely that they will issue that low which would make the yield destructive.




Final Thoughts

I think this is a good exposure to board FLT into a much bigger company with a lot bigger market cap after the acquisition.

Post-acquisition, the company will have 82 property assets that are held across Australia and Europe with a large portfolio value of $2.9B.

Statistics have shown that solid Reits who've done placement or rights at a premium to its NAV generally tends to do very well, so it'll only be a matter of time before we see the share price goes back to where they belong. If one cannot stand this minor noise we are undergoing, then I don't know how else you can get exposure to a good Reit.

I have a lot of exposures in this company, myself holding 100,000 shares and with the rest of my family members holding 35,000 shares on the rest, if this is a 3 for 1 at $1, then I am expecting to have a much larger position post the rights issue.

But this is something that I am definitely comfortable with holding.

Thanks for reading.

If you like our articles, you may follow our Facebook Page here.


31 comments:

  1. Hi B,

    I believe it shld be 1 for 3, i.e. one new unit for 3 existing units.

    ReplyDelete
    Replies
    1. Hi Unknown

      Thanks for correcting.

      Always mixed up with the terms.

      Delete
    2. EDWARD JONES FINANCE IS THE BEST PLACE TO GET A LOAN {Jonesloanfinance@yahoo.com},
      God bless you sir, I will not stop telling the world about your kindness in my life, I am a single mum with kids to look after. My name is Emily Thomas and I am from Convention Center Drive, Miami Beach, FL . A couple of weeks ago My friend visited me and along our discussion she told me about EDWARD JONES FINANCE, that they can help me out of my financial situation, I never believed cause I have spend so much money on different loan lenders who did nothing other than running away with my money. I have been in a financial mess for the pass 7 months now, She advised I give it a try so I mailed him and explain all about my financial situation to him, he therefore took me through the loan process and gave me a loan of $390,000.00 at a very low interest rate of 2% and today I am a proud business owner and can now take good care of my kids, If you must contact any firm to get any amount of loan you need with a low interest rate of 2% and better repayment schedule, please contact EDWARD JONES FINANCE email:- {Jonesloanfinance@yahoo.com} OR Text +1(307) 217-5388

      Delete
  2. Contemplating to buy after the exercise is over.
    Keep us posted. Very interesting times ahead for FLT.

    ReplyDelete
    Replies
    1. Hi Usurper

      Sure thing. Let us know if you decide to buy too :)

      Delete
  3. Hi B, thank you for your analysis and I like the acquisition too. One question, can you further explain what you mean by - Given FLT is trading at a premium to their NAV right now, it is more appropriate for the company to issue the financing via the equity since it also allows unitholders to participate in the growth.

    ReplyDelete
    Replies
    1. Hi Anonymous

      Good question!

      What I meant there was equity financing is usually more expensive than debt financing in nature and when the stock is trading at its high (premium to nav), its usually a good opportunity for management to do placement or rights issue at a high price which would not ended up dilutive to the shareholders.

      Delete
  4. Hi B,

    Thanks for the analysis. I do hold FLT as well and feel that the sponsor is rushing to dispose off the European Logistics Asset (some purchase less than a year).

    The pro forma DPU is only about 1.3% whereas the debts will increase to around 36%. Any concern on that ?

    ReplyDelete
    Replies
    1. Hi Darren

      I guess its difficult to pass the existing yield hurdle rate which means they’ve got to get a really fantastic cap rate on the properties to get this real attractive.

      I think overall its a very decent purchase. I’m not entirely sure either why FLT has to fund the debts from the FPL which is carried on the Dutch SPV, all along I thought FPL would carry that so that changes the whole structure of the story. If purchase consideration is merely $515.4m and they used the equity financing at $1 for 1 for 3 they could have kept the gearing remain at 30.6%. I guess its good to clarify that during the egm.

      Delete
    2. Hi B,

      That say the yield will be negative right if gearing at 30.6% ?

      Anyway Will you be attending the upcoming EGM ?

      Delete
  5. Hi B,

    First time opportunity for me to subscribe to rights! Can you advise what needs to be done?

    Thanks!

    ReplyDelete
  6. Hi Shirlynn

    It has not been announced yet since they have yet to pass the resolution EGM on the 5th May. Once that is passed, then they would send a circular on the info on any rights/preferential offering.

    I'll blog about it once they've concluded since I would be participating in them too :)

    ReplyDelete
  7. EDWARD JONES FINANCE IS THE BEST PLACE TO GET A LOAN {Jonesloanfinance@yahoo.com},
    God bless you sir, I will not stop telling the world about your kindness in my life, I am a single mum with kids to look after. My name is Emily Thomas and I am from Convention Center Drive, Miami Beach, FL . A couple of weeks ago My friend visited me and along our discussion she told me about EDWARD JONES FINANCE, that they can help me out of my financial situation, I never believed cause I have spend so much money on different loan lenders who did nothing other than running away with my money. I have been in a financial mess for the pass 7 months now, She advised I give it a try so I mailed him and explain all about my financial situation to him, he therefore took me through the loan process and gave me a loan of $390,000.00 at a very low interest rate of 2% and today I am a proud business owner and can now take good care of my kids, If you must contact any firm to get any amount of loan you need with a low interest rate of 2% and better repayment schedule, please contact EDWARD JONES FINANCE email:- {Jonesloanfinance@yahoo.com} OR Text +1(307) 217-5388

    ReplyDelete
  8. This comment has been removed by the author.

    ReplyDelete
  9. Hi B, should I buy before the EGM? So that I will be issue rights?

    ReplyDelete
    Replies
    1. Hi Anonymous

      There are several ways to play around this but if you want the rights then one of the option is to get the mother share before they announce the rights. We dont know yet if the rights are non tenouncable but if so you can also get it from the open market later. But all in all no hurry I think its better to get it when the rights are officially announced later.

      Delete
    2. Tks B for your reply. Appreciate it.

      Delete
    3. Hi B,

      Their acquisition announcement indicates the rights to be issued is non-renounceable. Actual text is "... partially funded by way of a private placement to institutional and other investors (the “Private Placement”) and a non-renounceable preferential offering of new units in FLT..."

      Delete
  10. Hi 3Fs,

    I am vested in FLT too. The slides showed the post-acquisition DPU would increase to 18.3 cents per quarter. Is this the ACTUAL DPU we would receive after the rights issue? I thought DPU would usually decrease due to the rights being listed? I was predicting around 13.5 cents per quarter after subscribing to rights.
    Need your advice on this. Thanks! ^^

    ReplyDelete
    Replies
    1. Hi DK

      The 1.83 cents is a proforma figure to their Q1FY18 so thats about a 1.7% increase to their dpu after issuing both equity and increasing their gearing. Not sure if thats the best move out there but seems the only way out for them to grow their AUM significantly for the moment.

      Delete
  11. Hi B,

    Fantastic job on your write-up! I have no FLT, basically I have no REITS for now, would it be good that I buy after rights are over? Appreciate your response soon. :)

    ReplyDelete




  12. Do you need a quick long or short term loan with a relatively low interest rateas low as 3%? We offer business loan, personal loan, home loan, auto loan, student loan, debt consolidation loan e.t.c. no matter your credit s core. We are guaranteed in giving out financial services to our numerousclients all over the r world. With our flexible lending packages, loans can be processed and transferred to the borrower within the shortest time possible, contact our specialist for advice and finance planning. If you need a quick loan contact us at: email : muslimgroupofcompany@gmail.com
    call or add us on what's app +1 647-489-4414
    Please, do provide us with the Following information If interested
    1) Full Name:.........
    2) Gender:.........
    3) Loan Amount Needed:.........
    4) Loan Duration:.........
    5) Country:.........
    6) Home Address:.........
    7) Mobile Number:.........
    8)Monthly Income:.....................
    9)Occupation:...........................
    )Which site did you here about us.....................
    Thanks and Best Regards.
    email : muslimgroupofcompany@gmail.com
    call or add us on what's app +1 647-489-4414

    ReplyDelete




  13. Do you need a quick long or short term loan with a relatively low interest rateas low as 3%? We offer business loan, personal loan, home loan, auto loan, student loan, debt consolidation loan e.t.c. no matter your credit s core. We are guaranteed in giving out financial services to our numerousclients all over the r world. With our flexible lending packages, loans can be processed and transferred to the borrower within the shortest time possible, contact our specialist for advice and finance planning. If you need a quick loan contact us at: email : muslimgroupofcompany@gmail.com
    call or add us on what's app +1 647-489-4414
    Please, do provide us with the Following information If interested
    1) Full Name:.........
    2) Gender:.........
    3) Loan Amount Needed:.........
    4) Loan Duration:.........
    5) Country:.........
    6) Home Address:.........
    7) Mobile Number:.........
    8)Monthly Income:.....................
    9)Occupation:...........................
    )Which site did you here about us.....................
    Thanks and Best Regards.
    email : muslimgroupofcompany@gmail.com
    call or add us on what's app +1 647-489-4414

    ReplyDelete




  14. Do you need a quick long or short term loan with a relatively low interest rateas low as 3%? We offer business loan, personal loan, home loan, auto loan, student loan, debt consolidation loan e.t.c. no matter your credit s core. We are guaranteed in giving out financial services to our numerousclients all over the r world. With our flexible lending packages, loans can be processed and transferred to the borrower within the shortest time possible, contact our specialist for advice and finance planning. If you need a quick loan contact us at: email : muslimgroupofcompany@gmail.com
    call or add us on what's app +1 647-489-4414
    Please, do provide us with the Following information If interested
    1) Full Name:.........
    2) Gender:.........
    3) Loan Amount Needed:.........
    4) Loan Duration:.........
    5) Country:.........
    6) Home Address:.........
    7) Mobile Number:.........
    8)Monthly Income:.....................
    9)Occupation:...........................
    )Which site did you here about us.....................
    Thanks and Best Regards.
    email : muslimgroupofcompany@gmail.com
    call or add us on what's app +1 647-489-4414

    ReplyDelete

  15. Do you need a financial help? Are you in any financial crisis or do you need funds to start up your own business? Do you need funds to settle your debt or pay off your bills or start a good business? Do you have a low credit score and you are finding it hard to obtain capital services from local banks and other financial institutes? Here is your chance to obtain a financial services from our company. We offer the following finance to individuals-
    *Commercial finance
    *Personal finance
    *Business finance
    *Construction finance
    *Business finance And many More:
    and many more at 2% interest rate;
    Contact Us Via Email:bullsindia187@gmail.com

    ReplyDelete

  16. Do you need a financial help? Are you in any financial crisis or do you need funds to start up your own business? Do you need funds to settle your debt or pay off your bills or start a good business? Do you have a low credit score and you are finding it hard to obtain capital services from local banks and other financial institutes? Here is your chance to obtain a financial services from our company. We offer the following finance to individuals-
    *Commercial finance
    *Personal finance
    *Business finance
    *Construction finance
    *Business finance And many More:
    and many more at 2% interest rate;
    Contact Us Via Email:bullsindia187@gmail.com

    ReplyDelete
  17. Hi,

    Do you need funding to start-up or expand a business?

    We give out all kind of loan like:
    Business loan
    Personal loan
    Home loan
    Agricultural loan
    Educational loan
    Auto loan and other good Reason.

    With over 10 years of experience helping people acquire, recover and stay in their homes and expand/start their business.
    We help new entrepreneur and smart business owners to grow with adequate finance. Contact us at Ford Credit Centre LLC a private lending firm registered in Atlanta.

    We give you quality service and our interest rate is calculated at 3% per annul.

    If you are interested send us a mail for the prerequisite to begin the funding process.

    Kind Regards
    Daniel Ford
    Ford Credit Centre LLC
    409.293.4195 cell
    404.400.4210 whatsapp
    danielfordllc@gmail.com
    info@fordcreditcentre.com
    www.fordcreditcentre.com

    ReplyDelete
  18. eToro is the most recommended forex broker for novice and advanced traders.

    ReplyDelete

UA-57154194-1