Frasers REIT Managers Propose S$5.7B Supersized Singapore Merger

The managers of a pair of Frasers Property-sponsored real estate investment trusts have agreed to the terms of a merger, which if approved by their unit holders, will result in a single REIT with a portfolio valued at S$5.7 billion ($4.2 billion), according to a joint statement by the REIT managers.

The proposed merger, which also needs to be sanctioned by the Singapore High Court, is scheduled to be undertaken by April next year by way of a trust scheme of arrangement, which will see Frasers Logistics & Industrial Trust buying all the units of Frasers Commercial Trust for S$1.537 billion, comprising S$138.1 million in cash and 1.128 billion in units.

The merged REIT would be one of the ten largest real estate trusts listed on the Singapore stock exchange with a diversified portfolio of 98 logistics, industrial, office and retail assets across Asia Pacific, Europe and the United Kingdom.

“The merger will be a win-win transaction for both Frasers Logistics & Industrial Trust and Frasers Commercial Trust unitholders, delivering distribution per unit accretion and greater growth prospects,” said the chief executive officer of the manager of Frasers Logistics & Industrial Trust, Robert Wallace. “We will be in an even stronger position to pursue growth and continue to deliver long-term value to our Unitholders”.

With a larger capital base and an asset pipeline in excess of S$5 billion, the REIT managers said the proposed merger would provide greater financial capacity and flexibility to pursue acquisitions.

Creating a Diversified Platform

Under the terms of the proposed merger, Frasers Commercial Trust unit holders are expected to receive S$1.68 for each unit by April next year, paid for with a cash consideration of S$0.151 in addition to 1.233 new units in Frasers Logistics & Industrial Trust at an issue price of S$1.240.

The scheme offers unit holders a premium of 3.5 percent on the one-month volume weighted average price up to 27 November this year of their Frasers Commercial Trust units.

Following the completion of the proposed merger, Frasers Property – which currently holds a 19.6 percent interest in Frasers Logistics & Industrial Trust and a 25.9 percent interest in Frasers Commercial Trust – is expected to hold 21.9 percent of the total issued units of the enlarged REIT.

“This merger will be transformational for both REITs, allowing us to tap on each other’s strengths to create an even more resilient and diversified platform,” said Jack Lam, chief executive officer of the manager Frasers Commercial Trust.

Frasers Property, which has total assets of S$37.6 billion, is also the sponsor of the Singapore-listed Frasers Centrepoint Trust and Frasers Hospitality Trust, while the group additionally sponsors a pair of SET-listed REITs – the Frasers Property Thailand Industrial Freehold & Leasehold REIT as well as the Golden Ventures Leasehold Real Estate Investment Trust.

99.5% Occupancy Across Five Countries

The enlarged REIT will manage 2.6 million square metres (30 million square feet) of space across Australia, Singapore, UK, Germany and the Netherlands.

With 300 tenants, occupancy of the portfolio as at 30 September stood at 99.5 percent with a weighted average lease expiry of 5.8 years, and no single tenant contribute more than 6 percent of the trust’s gross rental income.

The REIT managers said that the enlarged REIT’s exposure to any single asset or would not be more than 12 percent by value, while exposure to any single geography will not be more than 50 percent by value.

Logistics and industrial assets will make up 58 percent of the portfolio’s value, with 19.9 percent made up of business parks and 21.7 percent in central business district commercial assets.

Just under half of the assets by value, will be located in Australia, while 21.9 percent will be in Singapore, and 19.7 percent in Germany. Property in the UK will represent a 5.4 percent share of the portfolio, while real estate in the Netherlands will equal 4.6 percent.

Should the merger be completed, Frasers Logistics and Industrial Trust will acquire from a Frasers Property subsidiary a 50 percent interest in a business park in the UK for £90.1 million ($116 million), which will also become part of the REIT. The remaining 50 percent interest in the asset is held by Frasers Commercial Trust.

Supersizing Singapore REITs

The proposed merger between the pair of Frasers-sponsored trusts follows other proposals this year in Singapore to merge REITs to form larger trusts with more financial flexibility to acquire assets.

Just two weeks after the Singapore High Court sanctioned the merger of Ascott Residence Trust (Ascott REIT) and Ascendas Hospitality Trust (A-HTRUST).

That proposed consolidation of the two CapitaLand-sponsored real estate investment trusts is set to create the largest hospitality trust in Asia Pacific with the combined publicly traded real estate funds holding assets valued at S$7.6 billion.

OUE Hospitality Trust and OUE Commercial Trust are also poised to merge, with the managers announcing in April the terms of the merger that would see the two trusts form a REIT with a combined market value of S$2.83 billion.