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Frasers L&I Trust and 21 European assets.

Monday, April 23, 2018

My investment in FLT made more than a year ago has done quite well so far and I would have been quite happy to have them keep the status quo.

Of course, that is not how things work in the real world.





FLT is proposing to buy 21 properties in Europe from its sponsor, most of them German and the rest are Dutch.

Germany is Europe's strongest economy and that is one reason why I invested in IREIT Global so many years ago.





So, to me, that is a reason to like FLT's proposal to invest in German properties.

The properties are 100% occupied, are mostly freehold and mostly come with some form of built in rental escalation.





The proposed acquisitions should make FLT more resilient overall, having less concentration risk in terms of geography as well as tenants.

Of course, the most important question to be answered is how is this going to benefit us as retail investors from an income perspective?

After all, it is reasonable to assume that we are investing in FLT for income.





From FLT's presentation, the deal is likely to be yield accretive and NAV per unit is likely to creep upwards too.

So, income investors should approve.

However, it would depend on how the deal is funded and this is key.





We are not talking about buying 1 or 2 buildings here, we are talking about increasing the portfolio value by some 50%.

For a portfolio that is valued at more than a billion dollars, 50% is a big deal.







Even after taking on more debt, there is going to be a big shortfall.

So, there has to be equity fund raising which, of course, is a private placement and/or a rights issue.





Regular readers would know that I very much prefer a rights issue because it would allow retail investors like me to participate in the fund raising exercise as well.

The number of units in issue is going to increase by a third or so to help fund the deal.

There will be both a private placement and a rights issue.








Find the details in the EGM announcement on page 66: HERE.

As long as the deal allows retail investors to participate in the equity fund raising and as long as it is DPU accretive, I am happy enough for now.





See announcement: HERE.
See presentation: HERE.

Related post:
FLT and CRCT.

13 comments:

patricia said...

hi AK
I am queuing to buy some Frasers logistics at 1.05 and chanced upon your article that they are doing fund raising. should i wait till dust has settled before buying in? your thoughts please.
thanks

AK71 said...

Hi patricia,

You must have your reasons for thinking that $1.05 is a good price to enter.

Now, with this proposed deal, ask yourself if it will make FLT just as attractive, more attractive or not?

If it will make FLT just as attractive or more attractive, then, your reasons to buy at $1.05 should be still good to act upon.

You decide. ;)

The cool guy :) said...

Hi AK.

Projected DPU goes up a bit but the gearing increases rather significantly... In your opinion do you think its a good trade off? Is the currently yield good enough for the increase in gearing?

Love to hear your thoughts

Investminds said...

Hi Ak,

I am also invested in the FLT. i like the biz model and its strong sponsor. I hope to be given an opportunity to participate in the rights issues.

AK71 said...

Hi TCG,

I know what you mean and, unfortunately, paying out all or most of their cash flow, this is the price REITs pay to grow inorganically.

The sponsor is also definitely not pricing the assets cheaply.

I have not added to my investment in FLT since more than a year ago as its price pulled farther north of its NAV.

If not for a rights issue, it is unlikely I would add now.

AK71 said...

Hi IM,

A strong sponsor is a good thing but a strong sponsor that treats its REIT as a dumping ground is not. Just saying that it is early days yet for FLT. Time will tell. Crossing fingers.

AK71 said...

Private placement was well received.

Fund raising will continue with a non renounceable 1 for 10 rights issue (or preferential offering) to existing shareholders to be launched on May 23.

Rights units to be priced between 94.2c to 96.7c each.

Randy said...

seems a lot of people did'nt participate.

I oversubscribed, 2x my alloted shares, and got full allocation. Which I'm very happy buying FLT at big discount.

AK71 said...

Hi Randy,

96.7c per unit seems like a fair price to pay.

I got some of my application money refunded and did not get all the excess rights I applied for.

Talking to friends, it seems that most are successful in getting around 3,000 excess rights only which is also the case for me.

AK71 said...

Gabriel Tham:
wah....sure or not...i got 0 excess leh....even tho i am small investor only...


Jimmy Ng:
Got 2X of allocated rights too.
Likely to be very pale by comparison to AKBB's ^-^


Dominic N S Teo:
Got 1440 excess out of 9440 applied


PK Jan:
me got 1000 excess out of 2700 applied ✌️🤩

AK71 said...

Gabriel Tham:
AK u eat up too many excess liao....i only want 800 excess also no get

Randy said...

Hi AK,

Yup got my money refunded As well today. I got 3,500 out of 50k. LOL

Oh well, thought I got a good deal.

AK71 said...

Hi Randy,

We are in a sharing economy now.

Have to share the available rights units with many others.

No one is allowed to have a big chunk. ;p

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