Frasers Logistics & Industrial Trust (FLT) announced its proposal to acquire two prime industrial properties from its sponsor Frasers Property Limited in New South Wales (NSW) and Queensland.

The aggregate purchase consideration is A$62.6m, while total estimated cost works out to ~A$66.7m after adding in the acquisition fee, stamp duties and other fees.

The NSW property has a remaining land tenure of 88.9 years (as at 30 Jun 2018), WALE of 7.0 years and an estimated NPI yield of 6.1% with 100% occupancy.

For the Queensland property, it sits on freehold land, has a WALE of 4.2 years, is also fully occupied and has an estimated NPI yield of 6.8%.

The average fixed annual rental increments are 3.1% and 3.0% for the NSW and Queensland properties, respectively.

We are positive on this transaction given that it is expected to be DPU accretive to FLT, while the properties have a relatively young age (average 1 year) and are located in markets which FLT is already familiar.

The proposed acquisition is expected to be completed in Sep this year and will be fully funded from two recent divestments in Australia.

We have a BUY rating and S$1.18 fair value estimate on FLT.

Source: OCBC Research - 3 Sept 2018