Frasers Logistics & Commercial Trust is selling 357 Collins Street in Melbourne for A$195.3 million, or $164.1 million.
The selling price is a 0.6% premium to the property's June 1 independent valuation of A$191 million. FLCT estimates it will book net proceeds of $159.3 million.
FLCT says the sale aligns with its proactive asset management and portfolio rebalancing strategies, allowing itself to "strategically exit" the challenging Melbourne office CBD market, which continues to suffer from remote work culture, leading to an elevated vacancy level of 18.6% in Melbourne.
Post-divestment, FLCT's portfolio weighting towards logistics & industrial is expected to increase from its current level of around 72.4% to 74.2%, in line with FLCT’s strategic objective of achieving higher allocation to high-quality logistics and industrial properties.
According to FLCT, the sale will lift its overall portfolio occupancy to 95.2% from 93.9%, and extend its weighted average lease expiry profile from 4.6 years to 4.8 years.
FLCT says proceeds from the sale will give it more room to "pursue" opportunities.
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If all the net proceeds is used to pay down debt, its aggregate leverage is expected to be lowered by 1.5 percentage points from 36.1% to 34.6% on a pro forma basis, and its debt headroom increased to some $2,064.9 million post-divestment.
“The divestment of 357 Collins Street represents another strategic step in our ongoing portfolio reconstitution, which allows us to extract value from a commercial property and re-weight our portfolio towards logistics & industrial properties," says Anthea Lee, CEO of the manager.
"The proceeds from the sale will also provide FLCT with enhanced financial flexibility to pursue opportunities in the logistics & industrial space.”
FLCT units closed at 85.5 cents on July 16, up 0.59%.
