Summary of Results
A$‘000 |
4QFY19 |
4QFY18 |
Variance (%) |
FY2019 |
FY2018 |
Variance (%) |
Revenue |
61,616 |
60,439 |
1.9 |
240,758 |
195,766 |
23.0 |
Adjusted Net Property Income2 |
50,233 |
49,306 |
1.9 |
195,911 |
155,398 |
26.1 |
Distributable Income |
39,296 |
35,955 |
9.3 |
149,836 |
118,341 |
26.6 |
DPU (Australian cents) |
1.82 |
1.78 |
2.2 |
7.27 |
6.94 |
4.8 |
DPU (Singapore cents) |
1.73 |
1.78
|
(2.8) |
7.00 |
7.19 |
(2.6) |
SINGAPORE, 6 November 2019
Frasers Logistics & Industrial Asset Management Pte. Ltd., the manager of Frasers Logistics & Industrial Trust (“FLT” and the manager of FLT, the “REIT Manager”), today announced FLT’s results for the quarter ended 30 September 2019 (“4QFY19”) and financial year ended 30 September 2019 (“FY2019”).
REVIEW OF FINANCIAL PERFORMANCE
FLT reported higher revenue and adjusted net property income of A$61.6 million and A$50.2 million respectively, representing for both an increase of 1.9% from A$60.4 million and A$49.3 million in the corresponding financial quarter (“4QFY18”). The increase was backed by contributions from its acquisitions in Europe and Australia and were partially offset by divestment activities in Australia3. Distributable income was accordingly higher at A$39.3 million for 4QFY19, representing an increase of 9.3% from A$36.0 million a year ago.
ACQUISITION AND PORTFOLIO UPDATE
On 3 July 2019, the REIT Manager announced the proposed acquisition of interests in 12 prime logistics properties in Germany and Australia for a total consideration of approximately A$507.2 million. As at 30 September 2019, the acquisition of three Australian properties and seven out of the nine German properties had been completed.
In 4QFY19, FLT executed four leasing transactions in Australia and one in Germany for a total gross lettable area (“GLA”) of 49,268 square metres (“sq m”)4, bringing total leasing activity in FY2019 to 11 transactions representing 122,554 sq m or 5.5% of total portfolio GLA. Additionally, the asset enhancement at 468 Boundary Road, Derrimut, Victoria, Australia achieved practical completion in August 2019, which comprised an 11,209 sq m expansion to the existing hardstand area and an upgrade of facilities that included office refurbishment, car park expansion as well as sustainability improvements.
Post-quarter end in October 2019, FLT also entered into a five-year lease agreement with Amazon Commercial Services Pty Ltd (“Amazon”) for its 9,539 sq m tenancy at 60 Paltridge Road, Perth Airport, Western Australia, bringing its portfolio occupancy to 100% from 99.6% as at 30 September 2019.
As at 30 September 2019, the FLT portfolio has a weighted average lease expiry (“WALE”) of 6.31 years5, and minimal lease expiries representing 3.8% of gross rental income for the financial year ending 30 September 2020.
The total value of FLT’s portfolio was approximately A$3.6 billion as at 30 September 2019, representing a valuation uplift of A$101.1 million.
Mr. Robert Wallace, Chief Executive Officer of the REIT Manager, said, “FLT maintained a creditable performance in FY2019, achieving distributable income growth and a stable DPU notwithstanding the volatile currency market. We deepened our foothold in the major logistics markets of Australia, Germany and the Netherlands via the acquisitions of 116 freehold logistics properties and undertook three opportunistic divestments that were all transacted at premiums to book value. Leasing momentum for the year was strong with 11 deals signed, which will provide stability of income.
Our continuing growth was also characterised by FLT’s inclusion into the FTSE EPRA/NAREIT Index and GPR 250 Index series this year, enhancing our outreach to global institutional investors. FLT also maintained its leadership position in sustainability for industrial properties, being placed first globally by the Global Real Estate Sustainability Benchmark for the second consecutive year.”
CAPITAL MANAGEMENT
As at 30 September 2019, FLT’s aggregate leverage was 33.4%. Total borrowings were A$1,244 million, 60% of which were at fixed interest rates. The weighted average interest rate for borrowings excluding upfront debt related expenses for 4QFY19 was 2.2% per annum compared to 2.5% a year ago.
DISTRIBUTION
FLT’s total distributions for the six-month period from 1 April 2019 to 30 September 2019 amounted to 3.46 Singapore cents per unit. This comprises a distribution of 1.01 Singapore cents per unit for the period from 8 August 2019 to 30 September 2019, which will be paid out on 16 December 2019, and an advanced distribution of 2.45 Singapore cents per unit for the period from 1 April 2019 to 7 August 2019, which was paid on 1 November 2019.
INDUSTRIAL MARKET OUTLOOK
Australia7
Australian industrial take-up levels have been robust with approximately 2.3 million sq m leased over the 12-month period to September 2019, supported by demand from e-commerce, food and grocery, pharmaceutical and third-party logistics users. The strong demand for industrial space is largely attributable to strong population growth, public infrastructure spending and growth in the e-commerce sector. Australia’s population growth over the next five years is projected to rank third amongst the world’s advanced economies.
National take-up levels continue to exceed new completions and as a result, vacancies are at their lowest level in five years across the three major industrial markets of Sydney, Melbourne and Brisbane. Prime face rents have recorded steady year-on-year growths of 2.4% and 1.3% in Sydney and Melbourne respectively, while the Brisbane industrial market is recovering with prime rents returning to pre-2017 levels with 2.4% prime rental growth in the last 12 months.
Investor demand for industrial space remains strong with evidence of further yield compression compared to the second quarter of 2019 however, the yield compression is forecast to stabilise. In the absence of capital growth, rental growth is expected to drive industrial returns in future years.
Germany and the Netherlands8
For Germany, take-up levels for logistics and industrial properties of above 5,000 sq m remained high at 4.7 million sq m for the first nine months of 2019, as new supply for the rental market remained limited with users continuing to seek build-to-suit solutions. Average prime yields for the major German logistics hubs remain at 3.8% as at September 2019, which is the lowest yield recorded for Europe.
For the Netherlands, take-up levels for logistics and industrial properties of above 5,000 sq m also remained high at 2.2 million sq m for the first nine months of 2019. Prime rents recorded increase, while prime yields decreased to 4.4% for the Venlo logistics market, from 4.5% in the preceding quarter.
Overview
The REIT Manager continues to monitor key macro developments, including the ongoing global trade tensions and Brexit. Looking ahead, the REIT Manager will remain focused on its proactive asset and lease management strategies and will continue to grow FLT’s portfolio with a focus on generating sustainable long-term value for unitholders.
1 FLT’s distributions are made on a semi-annual basis for the six-month periods ending 31 March and 30 September
2 Net property income excluding straight lining adjustments for rental income and after adding back straight lining adjustments for ground leases
3 Please refer to Pages 2 and 9 of FLT’s Financial Statements dated 6 November 2019 for details of the acquisitions and divestments
4 Please refer to Slide 20 of FLT’s Results Presentation dated 6 November 2019 for details
5 Calculated on a gross rental income basis (excluding straight lining rental adjustments) with respect to the unexpired lease terms of the existing tenants
6 Excludes the two German properties which are yet to complete as at 30 September 2019
7 Sources: JLL Research – Industrial Market Snapshot 3Q 2019; Knight Frank Research – Australian Capital View Outlook 2019
8 Source: BNP Paribas Real Estate International Research, 3Q 2019