Frasers Commercial Trust (FCOT) announced that it has entered into a 50:50 JV with its sponsor, Frasers Centrepoint Limited, to acquire Farnborough Business Park (FBP), which comprises 14 commercial buildings in the UK. The purchase consideration of the asset comes in at GBP 174.6m, which is at a slight discount to the property valuation of GBP 175.05m.

FBP has a long WALE of 8.3 years with a high occupancy rate of 98.1%. Based on pro forma NPI as at 30 Sep 17, we estimate the S$ NPI yield of FBP to be ~6.4%, which is higher than that of FCOT’s existing portfolio yield of ~5.5%.

The acquisition is expected to be accretive, with pro forma DPU expected to increase by 1.6% from 9.82 S-cents as at 30 Sep 17 to 9.97 S-cents, assuming financing based on a combination of debt and equity.

What is notable is that this comes on the back of an expanded investment mandate for FCOT with the inclusion of commercial real estate assets in Europe, including business parks.

Further to an analyst briefing, we place our HOLD rating and S$1.42 fair value estimate under review.

Source: OCBC Research - 15 Dec 2017