Frasers Logistics mmercial Trust Reports FY2024 DPU Of 6.80 Singapore Cents

PRESS RELEASE

For FY2024, FLCT reported revenue of S$446.7 million and Adjusted Net Property Income of S$320.0 million, representing increases of 6.2% and 2.7% respectively, from S$420.8 million and S$311.4 million in FY2023. The increases were contributed by full year contributions from Worcester and Connexion II, maiden contribution from Ellesmere Port in the UK, and contributions from the acquisition of interests in four German logistics properties in March 2024. The increases were partially offset by higher vacancies in Alexandra Technopark and 357 Collins Street, as well as higher property operating expenses. The higher property operating expenses were mainly due to higher non-recoverable land taxes in Australia.

Finance costs rose mainly due to the increase in interest rates and additional borrowings drawn for capital expenditure, fund through developments and acquisitions. As a result of the above, Distributable Income for FY2024 was lower at S$255.5 million, from S$262.3 million in FY2023.

The distribution per unit ("DPU") for 2HFY24 was 3.32 Singapore cents, which will be paid on 17 December 20242. In addition to the DPU of 3.48 Singapore cents reported for 1HFY24, FLCT's total distribution for FY2024 amounts to 6.80 Singapore cents, or a distribution yield of 5.9%3.

PORTFOLIO UPDATE

For FY2024, the FLCT portfolio demonstrated resilience, driven by healthy leasing momentum with 421,000 square metres ("sq m") or 15.1% of the portfolio committed. The portfolio average rental reversion achieved for FY2024 was +12.8% on an incoming rent vs. outgoing rent basis and +23.6% for the average rent of the new lease as compared to the average rent of the preceding lease ("average rent vs. average rent"). The logistics & industrial portfolio, in particular, demonstrated its strength with rental reversions of +22.7% and +38.8% on an incoming rent vs. outgoing rent basis and on an average rent vs. average rent basis respectively in FY2024, outperforming the portfolio average.

FLCT maintained a high portfolio occupancy of 94.5% as at 30 September 2024, with the logistics & industrial portfolio at 98.8%, and the commercial portfolio at 87.5%. The portfolio weighted average lease expiry ("WALE") is 4.2 years. These results underscore the resilience of FLCT's portfolio strategy and its ability to navigate market dynamics effectively, particularly in logistics & industrial.

As at 30 September 2024, FLCT's portfolio of 112 properties across five countries was valued at S$6.8 billion. This valuation reflects market pressures including capitalisation rate expansion and commercial sector vacancies, which were partially offset by robust market rental growth in the logistics and industrial sectors, and translation impact from the stronger Australian Dollar and Sterling Pound as at 30 September 2024 as compared to 30 September 2023. Net asset value per unit was S$1.13 as at 30 September 2024.

During the year, FLCT also completed the development of the logistics & industrial property in Ellesmere, North West England in December 2023, while the façade replacement for Central Park in Perth was successfully completed in August 2024.

INVESTMENT UPDATE

FLCT continued its strategic growth through selective acquisitions in the logistics and industrial sector. In FY2024, FLCT completed approximately S$144.0 million of acquisitions, comprising interests in four German properties and a forward funding project in the Netherlands. These strategic additions have increased the proportion of logistics and industrial assets in FLT's portfolio from 70.0% a year ago to 71.9% as at 30 September 2024, aligning with our focus on high-quality logistics and industrial properties in key markets.

Subsequent to the year end on 17 October 2024, FLCT announced the proposed acquisition of a prime logistics property in Singapore located near the Tuas Mega Port, for S$140.3 million4. This acquisition is aligned with its strategy to expand FLCT's logistics & industrial portfolio weightage in developed markets.

A member of Frasers Property Group

PRESS RELEASE

Ms. Anthea Lee, Chief Executive Officer of the REIT Manager, said, "In FY2024, FLCT demonstrated resilience in the face of ongoing challenges. Our core logistics and industrial portfolio continued to show strength and these assets consistently outperformed, delivering robust rental reversions and maintaining their position as a key driver of FLCT's overall performance.

Looking ahead, we remain committed to increasing FLCT's logistics and industrial exposure, while maintaining prudent capital management. Our acquisitions in Germany and the forward funded projects, as well as the acquisition of a prime logistics property in Singapore announced in October 2024, align with this strategy. FLCT's low aggregate leverage also positions us well to capitalise on strategic growth opportunities while maintaining financial flexibility.

We are also pleased that our sustainability efforts continue to be recognised, with FLCT maintaining its 5-star rating in the GRESB Real Estate Assessment for the eighth consecutive year and being named a GRESB Global Listed Sector Leader in the diversified office/industrial sector."

CAPITAL MANAGEMENT

As at 30 September 2024, FLCT's aggregate leverage remained healthy at 33.0%, with a weighted average debt maturity of 2.4 years and high interest coverage ratio of 5.0 times. With a high proportion of 73.3% of borrowings at a fixed rate as at 30 September 2024, FLCT's cost of borrowings for FY2024 was 2.8%5 per annum.

FLCT is rated "BBB+" rating by Standard & Poor's with a stable outlook.

ESG LEADERSHIP

Sustainability is integral to FLCT's operations and FLCT remains committed in delivering sustainability outcomes that underpin long-term performance. During the year, FLCT continues to make progress in various green initiatives, such as achieving green certification for additional properties in the portfolio and securing sustainability linked loans. In the 2024 GRESB Real Estate Assessment, FLCT maintained its highest 5-star rating for the eighth consecutive year and was recognised as a GRESB Global Listed Sector Leader in the diversified office/industrial sector.

OUTLOOK

An overview of the countries in which FLCT has a presence is provided below:

Australia

In the quarter ended June 2024, the Australian economy grew 0.2%, while the annual change in the Consumer Price Index (CPI) over the 12 months to June 2024 was 3.8%6.

The industrial sector showed mixed performance in the third quarter of 2024 ("Q3 2024")7. Gross industrial take-up totalled 583,200 sqm nationally, with year-to-date (YTD) gross take-up reaching 1.7 million sqm. This figure is unlikely to reach the long-run average of 3.0 million by the end of 2024. Sydney was the largest contributor, representing 35% of the national total take-up.

Despite slower growth, positive rental trends continued. For the last 12 months to 30 September 2024, prime rents in Melbourne, Sydney and Brisbane increased by more than 11%, 7% and 19% respectively. In Sydney, while the vacancy rate rose to 2% as of the first half of 2024, it remained relatively low by historical standards.

Pre-lease transactions accounted for over half of the lease activity in Q3 2024, a trend expected to continue as new developments enter the market. In Melbourne, while industrial vacancies remained tight at 2.0%, pre- commitment levels for projects under-construction and due to complete in 2024 is at approximately 21%.

A member of Frasers Property Group

PRESS RELEASE

Notably, the average incentive for Melbourne prime grade assets increased by seven percentage points year- on-year to 18% in Q3 2024.

In contrast to the industrial sector, the office market continues to see challenges, particularly in Melbourne. The Melbourne CBD office vacancy rate remained high at 21% in Q3 20248. The Perth office market showed more resilience, with the prime vacancy rate normalising at 13% over the quarter. However, the region's economic growth is expected to moderate on slowing export growth, while new supply is expected to remain moderate throughout 20259.

Germany, the Netherlands and the UK

The European Central Bank (ECB)10 reduced its key interest rate by a quarter point in October 2024 and has stated it will continue to follow a data-dependent and meeting-by-meeting approach to determine appropriate interest rate levels, without pre-committing to a particular rate path. The ECB projects inflation to average 2.5% in 2024, declining towards its 2% target over the second half of 2025. Economic growth in the eurozone remains subdued, with ECB projecting growth of 0.8% in 2024, rising to 1.3% in 2025 and 1.5% in 2026, a slight downward revision from previous forecasts.

The logistics and industrial investment market in Europe has shown a noticeable recovery, accelerating through the middle of 2024 with momentum expected to continue in the coming months11. However, the slowing European economic growth in 2023 has eased pressure on logistics rental growth. While vacancy rate remains low in most markets, rising supply and slowing demand are pushing rents upwards at a slower rate12.

In the UK logistics market, take-up in the second quarter of 2024 ("Q2 2024") was 21% ahead of the previous quarter and the highest quarterly total recorded since Q3 2022. The sizeable amount of space under offer at end-June 2024 suggests further improvement in volumes for the second half of 2024. Although the pace of rental growth has decelerated, new developments continue to set new headline rents. Rental growth for prime units over 50,000 sq ft rose by 7.8% in the year to Q2 202413. With the growing importance of ESG amongst occupiers, rents of non-compliant properties are likely to come under increasing pressure. While capital value declines have slowed, near-term prospects for capital appreciation appear limited, though investment returns are expected to improve.

In the commercial market, the rate of price decline for best-in-class assets has begun to slow, indicating signs of stabilisation. The flight to quality in the occupier market is set to continue, reflecting the trend of occupiers using their buildings to attract employees to the office.

Singapore

In Singapore, overall demand for business parks remained cautious as consolidations outweighed new setups and expansions, as firms continued to prioritise cost-savings and workplace optimisation strategies14. Following a record new supply of over 4 million sq ft of business park and light industrial space since end-2022 and upcoming supply pipeline, vacancies within the sector remains at 21.4%. Overall rents decreased by 0.8% for 2024 year to date for city fringe business park and 1.4% for rest of island business parks.

Outlook

The REIT Manager remains cognisant of the global low economic growth and an evolving interest rate environment. While there are signs of potential easing in monetary policy, the REIT Manager continues to maintain a prudent capital management approach and employ appropriate hedging strategies to mitigate FX and interest rate risks.

A member of Frasers Property Group