Frasers trust sells Cross Street Exchange for $810.8 mil

The manager of Frasers Logistics & Commercial Trust (FLCT) on Jan 24 announced that it has divested Cross Street Exchangefor $810.8 million. The buyer is reported to be Hong Kong private equity player PAG, according to Mingtiandi.

The sale price represents a 28.3% premium to the leasehold property’s book value of $632 million as at Sept 30, 2021, and will be paid in cash. After deducting the total divestment cost of the REIT, total proceeds will be $802.7 million, resulting in a net gain of $170.7 million.

The sale and purchase agreement was made by FLCT’s wholly-owned sub-trust, Frasers Commercial Trust.

Cross Street Exchange is formerly known as China Square Central, and is located at 18, 20 and 22 Cross Street in the CBD.

The proposed divestment is in line with the manager’s asset management and portfolio rebalancing strategies. According to the manager, it will also unlock value for unitholders at the “optimal stage of [the property’s] lifecycle”.

Following the completion of the divestment, FLCT’s portfolio’s weighting towards the logistics and industrial sector will increase to 66.9% from 61.1%.

The proposed divestment will also enhance FLCT’s portfolio metrics, with a higher overall portfolio occupancy rate of 97.1%, from 96.2%. Furthermore, the REIT’s properties will now have a longer weighted average lease expiry profile of 5.0 years, from 4.8 years previously.

On a pro forma basis for FY2021 ended Sept 30, the proposed divestment will raise FLCT’s total net asset value to $4.75 billion from $4.57 billion, translating to a raised net asset value per unit of $1.29 from $1.24.

FY2021 distribution per unit on a pro forma basis will, however, be lowered to 7.33 cents from 7.68 cents. Distributable income for the period will stand at $257.6 million, down from $270.1 million, assuming 49.2% of the divestment net proceeds will be used to repay outstanding borrowings on Oct 1, 2020.

FLCT’s total leverage is expected to be lowered by 4.4 percentage points to 29.3% on a pro forma basis, assuming that 49.2% of the proceeds will go to repaying the REIT’s outstanding debt.

The proposed divestment is expected to be completed on March 31.