Frasers Logistics and Commercial Trust Buying ESR Singapore Warehouse for $107M

Frasers Logistics and Commercial Trust announced late this past week that it has agreed to acquire a warehouse near Singapore’s Tuas Port for approximately S$140.3 million ($107 million) giving the REIT its first logistics asset in Singapore.

The SGX-listed trust is buying 2 Tuas South Link 1 from regional industrial giant ESR giving FLCT 56,203 square metres (605,000 square feet) of lettable warehouse space less than seven kilometres (4.3 miles) from Tuas Port, which opened in 2022.

In a statement, the manager of FLCT, which counts just one Singapore property among its 112 assets, pointed to the acquisition as a way to increase its revenues both from logistics and from its home market.

“This DPU-accretive acquisition marks FLCT’s entry into Singapore’s robust logistics and industrial market via a prime logistics property. It aligns with our commitment to grow FLCT’s logistics and industrial portfolio,” said Anthea Lee, chief executive of REIT’s manager. “Located in proximity to the Tuas Mega Port, this acquisition will position FLCT to capitalise on the strong demand for logistics in Singapore while increasing the income stream derived from Singapore properties.”

Expanding in Singapore

FLCT described the deal as aligned with its aim of expanding its logistics and industrial holdings in developed markets, noting that occupancy for prime logistics properties in Singapore now averages 94.6 percent. The trust’s manager noted that growing its portfolio in Singapore will reduce the REIT’s exposure to foreign exchange volatility.

The managed by Singapore’s Frasers Property REIT is paying just over S$2,496 per square metre for 2 Tuas Link with the transaction expected to complete in the first quarter of next year.

With S$20 billion being invested into the Tuas Mega Port, FLCT’s manager indicated that the property’s proximity to that project, which is expected to nearly double Singapore’s container handling capacity to 65.0 million TEUs when it becomes fully operational sometime in the 2040s would potentially enhance its value.

The property was 85.8 percent occupied with a weighted average time to lease expiry of approximately 1.8 years as at 30 September 2024, FLCT said, while pointing to the potential to benefit from rent escalations.

Under an occupancy guaranteed clause in the sale and purchase agreement, the purchase price will be adjusted by up to S$3.3 million if 2 Tuas Link is less than 100 percent occupied at the time that the acquisition is completed, according to the statement.

FLCT said it plans to finance all costs and fees related to the acquisition through external debt. ESR has yet to comment publicly on the asset sale and had not yet responded to inquiries from Mingtiandi by the time of publication.

Former Logos Project

The 33,300 square metre 2 Tuas South Link site was acquired via a government tender in May 2016 for S$37.5 million, with Logos Property announcing in August of that year that it was teaming up with local firm Yang Kee Logistics to invest an estimated S$150 million in developing a project on the site.

Yang Kee and Logos, which became part of ESR through the latter’s acquisition of ARA Asset Management in a deal which completed in January 2022, broke ground on the project in March 2017 with the six-storey facility completed the following year.

The ramp-up warehouse is certified Green Mark Platinum under Singapore’s regimen for sustainable buildings, with the deal having been brokered by CBRE’s industrial and logistics team.

ESR in July this year acquired the remaining 13.6 percent stake in Logos Property which it did not yet own from founders Trent Iliffe and John Marsh, after buying out shares held by former Logos’ former Southeast Asia head Stephen Hawkins a month earlier.

Following that transaction, Iliffe set about establishing an independent industrial venture involving assets previously developed by Logos in Vietnam and India, according to sources who spoke to Mingtiandi at the time.