FLT expects income loss over Australian warehouse-office property sale

The mixed-use property is supposed to contribute 3.9% to FLT’s property income.

Frasers Logistics & Industrial Trust (FLT) was able to sell 80 Hartley Street, Smeaton Grange in New South Wales for $90.5m, 40.3% higher than the property’s book value. With this sale, FLT is posed to take up the “red-hot” demand for warehouses in Sydney, DBS Equity Research said.

However, DBS Equity Research analyst Derek Tan noted that FLT expects a loss of income. “The impact on financials is noticeable as the property’s net property income (NPI) is projected to form around 3.9% of FLT’s 2Q2018 portfolio but NPI contribution after accounting for the full year contribution from the REIT’s European portfolio acquisition is projected to fall to around 2%.”

However, Tan said acquisitions will more than compensate for the loss of income. The exit yield is estimated to be around 6.1%, after lease extension and before incentives.

Tan added, “We are positive that the Manager of FLT has chosen to selectively realise their value through divestments. The Manager has been able to unlock a significant gain through the divestment and the proceeds can be utilised towards other higher-yielding assets.”

The property has a gross floor area (GFA) of 61,281 sqm and was constructed more than 20 years ago back in 1998. It has a cross-dock, regional distribution facility with office accommodation and offers good access to trucks and ample car park spaces.