Frasers confirms £743m UK business parks buy

By James Buckley - Monday, September 11, 2017 11:04

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Frasers Property International, a subsidiary of Frasers Centrepoint, has confirmed it has entered into sale and purchase agreements with Oaktree Capital Management to acquire a portfolio of four UK business parks for £686m, as well as a separate deal to buy the Maxis business park in Bracknell for £57m subject to certain conditions.

The acquisition comprises 4.9m sq ft of built area across four freehold business park assets, including the 1.5m sq ft Winnersh Triangle in Reading (sold for £365m); Chineham Park, Basingstoke (£142m); Watchmoor Park, Camberley (£42m); and Hillington Park in Glasgow (£137m).

Separately, Frasers Property has also entered into a conditional agreement with Oaktree to acquire another business park, Maxis, Bracknell, subject to conditions relating to net operating yield and Maxis achieving an occupancy of at least 95%. If the conditions in the Maxis agreement are satisfied, completion of the acquisition will take place no later than 20 working days after 29 June 2018.

The net purchase price for the 199,000 sq ft Maxis development is £57m and Frasers Property intends to finance the deal in cash, funded from borrowings and internal resources.

Panote Sirivadhanabhakdi, group chief executive officer of FCL, said: “The acquisition is in line with the group’s strategy to grow overseas presence and recurring income sources. The group has been in the UK and Europe for over 15 years, and we now extend our presence from the residential, hospitality, industrial and logistics sectors to include the commercial and business park sector.

“Post-acquisition, on a pro forma3 basis, the group will have around S$4.2bn of assets in the UK and Europe, and commercial properties as a proportion of FCL’s S$26.8bn of total assets will increase to around 30%.

“We can also potentially benefit from the “network effect”, given that we are already in the industrial, logistics, commercial and business park sectors in Australia, Germany, the Netherlands, Singapore and Thailand.

“The properties are highly defensive with growth prospects. From a tenancy perspective, the rental income from the properties are underpinned by long term leases to a diversified base of over 400 tenants. The properties have a long WALE of 5.9 years and tenants include reputable large companies such as BMC Software, Ericsson, Harris Systems, Intel, Level 3 Communications and Novartis. Therefore, the cashflow is highly defensive and the Acquisition further strengthens FCL’s recurring income base. In addition, with over 1.4 million sq ft of development built area, there is opportunity to increase built area by almost 30% in the future.”

The properties have occupancy rates of over 85% and high retention rates of around 80-85%.

Sirivadhanabhakdi added: “UK is one of the largest economies globally. It has a highly institutionalised and attractive real estate market with a transparent and efficient legal regulatory and tax framework. In particular, the UK business park market has demonstrated resilience and continued growth post the Brexit vote. Favourable supply-demand dynamics, driven by: (i) desire for integrated lifestyle and community based business space with a live-work-play proposition; (ii) demand for cost-efficient alternatives to city centre locations; and (iii) historical low vacancies, make the UK business park sector a very attractive market to further extend our platform.”

The acquisition will be fully funded through a mix of debt and FCL’s internal resources. It is expected that the acquisition will complete within 60 days from the date of signing of the sale and purchase agreements, whilst the completion of the Maxis Acquisition will take place no later than 20 working days after 29 June 2018.

Standard Chartered Bank is the financial advisor to FCL for the acquisition. JLL advised Oaktree.

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