Frasers CentrePoint Trust

[swakoo]

Hi Swakoo,

- 825mil x 2 is equal to the property valuation of 1.65bil in 2012. But 652.5mil x 2 is not equal to the 2.08bil property valuation in 2023. As such, we can reasonably assume that these 2 numbers are not apple-to-apple comparative. Therefore we cannot use them directly to derive the capital gain/loss by just a subtraction.

- As mentioned earlier, 825mil (2012) is probably the enterprise value. It means that this price tag is not only the cash exchange but also includes the debt that it assumes at the point of purchase.

- As for 652.5mil (2023), more details have been revealed and so we know that the Fraser folks are folking out this quantum of cash (ie. 652.5mil) for the property.

- Then you may ask, why is a 50% share of the property been sold in 2023 at a "smaller quantum" than 2012? (well, not exactly a "smaller quantum" if you understand what I m trying to say earlier). My guess is that after 2012, NTUC refinanced and took a bigger mortgage loan. The Frasers folks are probably faced with a bigger percentage mortgage loan than in 2012 when NTUC bought it.

Hi Weijian,

There are actually 3 property valuations:
2012: S$1.65 bil
30 Sep 2022: S$1.31 bil
31 Dec 2022: S$2.08 bil

Gold Ridge is the vehicle that owns, manages and operates Nex. It handles capital management, not the stakeholders like Mercatus (NTUC).

Mercatus paid S$825 mil for 50% stake in Gold Ridge in 2012.
It sells the 50% stake for S$652.5 mil in 2023.
It probably received income distributions from Gold Ridge over the years, not disclosed in the communications.
Think any refi done by Gold Ridge would impact the risk profile of stakeholders like Mercatus (NTUC) but would not involve cash flowing to or from stakeholders at time of refi.

Separate question is why valuation was bumped up significantly between Sep and Dec 2022 though it did not seem to affect actual sale value. If this is due to omicron coming under control and is realistic, it should begin to show up in the earnings reports of upcoming reits that have retail assets?

[weijian]

Hi Weijian,

There are actually 3 property valuations:
2012: S$1.65 bil
30 Sep 2022: S$1.31 bil
31 Dec 2022: S$2.08 bil

Gold Ridge is the vehicle that owns, manages and operates Nex. It handles capital management, not the stakeholders like Mercatus (NTUC).

Mercatus paid S$825 mil for 50% stake in Gold Ridge in 2012.
It sells the 50% stake for S$652.5 mil in 2023.
It probably received income distributions from Gold Ridge over the years, not disclosed in the communications.
Think any refi done by Gold Ridge would impact the risk profile of stakeholders like Mercatus (NTUC) but would not involve cash flowing to or from stakeholders at time of refi.

Separate question is why valuation was bumped up significantly between Sep and Dec 2022 though it did not seem to affect actual sale value. If this is due to omicron coming under control and is realistic, it should begin to show up in the earnings reports of upcoming reits that have retail assets?

Hi swakoo,
Do you have the source of the valuation on Sept2022? (so I can take a look and you probably may be an NTUC bond/co-op member who readily have it)

Your separate question is valid. I asked a similar question recently in the Great Eastern thread with regards to GE's investment returns as a result of rising interest rates. Their investment returns will increase but similarly, with risk free rate also increasing, the discount rate will also increase and hence many of their asset valuations (embedded value) will be affected in the opposite direction.

As I am not in the property valuation sector, I do not have a good grasp of the net effects for REITs. But I reckon it is reasonable to assume that there will be some unwinding of the property devaluations that happened in the last 2 years (FY20 especially). In fact, I believe the market has also anticipated this unwinding but it also anticipates increased interest payments and higher risk free rates that will increase the cap rates.

[swakoo]

Do you have the source of the valuation on Sept2022? (so I can take a look and you probably may be an NTUC bond/co-op member who readily have it)

Hi weijian,

The Sep 2022 valuation is from the BT article on the acquisition (which was linked in your original posting). Do not have privilege of being an NTUC member.  :o)

If the cap rate for very well located suburban malls (just like Nex) has compressed significantly, we should see it in CICT's earnings release this Wed morning, as it should include property valuations at it's year end. Let's see...

[weijian]

Hi weijian,

The Sep 2022 valuation is from the BT article on the acquisition (which was linked in your original posting). Do not have privilege of being an NTUC member.  :o)

If the cap rate for very well located suburban malls (just like Nex) has compressed significantly, we should see it in CICT's earnings release this Wed morning, as it should include property valuations at it's year end. Let's see...

The purchase consideration takes into account Gold Ridge’s adjusted net asset value (NAV) of S$1.31 billion as at Sep 30, 2022

hi swakoo,
The 1.31bil stated in the article refers to the NAV (Net Asset Value) and not the property valuation. 

NAV = All current/non current asset - all current/non current liabilities
Property valuation = Non current asset value of this NEX investment property

So this isn't an apple to apple comparison.

[swakoo]

hi swakoo,
The 1.31bil stated in the article refers to the NAV (Net Asset Value) and not the property valuation. 

NAV = All current/non current asset - all current/non current liabilities
Property valuation = Non current asset value of this NEX investment property

So this isn't an apple to apple comparison.

Hi weijian,

Yes, u're right. Just noticed the earlier link has now posted a correction to it's initial content (which was the source of the confusion)!
earlier link has a correction

[weijian]

Mgt has directly addressed the threat of the RTS that will probably start operating in less than 2 years time in AR24. In essence, it is a headwind but Mgt believes that the tailwind of the new Woodland/Sembawang residential area will more than negate it.

Personally, I think retail concepts related to bulk (eg. grocery), convenience (7-11, Old ChangKee etc), experiential (eg. cinemas) or educational (tuition/music centers etc) will do well against the RTS headwinds. As for retail concepts like F&B or beauty/personal care, I suspect they will be under huge threat. And unfortunately, these retail concepts under huge threat probably also account for much higher rental/sqm.

But all in all, just like how malls adapted to e-commerce, we would expect FCT's northern malls to adapt to the RTS.

REVIEW OF FY24 PERFORMANCE

In addition, the Government has also announced plans for 14,000 new homes in Woodlands North Coast and Sembawang North, in addition to the existing plan for 10,000 new homes in Woodlands. Plans are also in the pipeline for 8,600 new homes to be added to Yishun and Sembawang between 2024 and 2029

The other significant development in the North Region is the Johor Bahru-Singapore Rapid Transit System (RTS), scheduled to commence in end-2026.

We have conducted research on the potential impact and scenarios, held conversations with our retailers and F&B operators and kept close watch on the situation.

We believe Causeway Point is well-positioned as the connection hub in the Woodlands region for the RTS travellers and the working population, in addition to the residential catchment. Causeway Point is well connected to a regional bus interchange and the Woodlands MRT station which serves as the interchange station for the North-South Line and the ThomsonEast Coast Line. The RTS station in Singapore will be connected to the Woodlands North Station on the Thomson-East Coast Line, which is one station away from Causeway Point. We anticipate higher shopper traffic through Causeway Point with the rise in residential and commuter traffic. This gives us the opportunity to enhance the retail and F&B offerings with the rise in shopper traffic and improved spending capacity.

In summary, we believe the upside opportunities from the upcoming developments and increase in working population and residential catchment in the North Region will outweigh the downside risk from the retail sales loss to Johor Bahru. We are confident that our two malls in the North - Causeway Point and Northpoint City – will remain resilient and continue to do well in the long run.

FCT AR24: https://links.sgx.com/FileOpen/Annual_Re...eID=828582

[specuvestor]

Would be instructive to see what Link REIT said 2 years ago when the borders were thrown open; and subsequently simplified the transit process

Anyways have a great 2025 VBs!

Mgt has directly addressed the threat of the RTS that will probably start operating in less than 2 years time in AR24. In essence, it is a headwind but Mgt believes that the tailwind of the new Woodland/Sembawang residential area will more than negate it.

Personally, I think retail concepts related to bulk (eg. grocery), convenience (7-11, Old ChangKee etc), experiential (eg. cinemas) or educational (tuition/music centers etc) will do well against the RTS headwinds. As for retail concepts like F&B or beauty/personal care, I suspect they will be under huge threat. And unfortunately, these retail concepts under huge threat probably also account for much higher rental/sqm.

But all in all, just like how malls adapted to e-commerce, we would expect FCT's northern malls to adapt to the RTS.

REVIEW OF FY24 PERFORMANCE

In addition, the Government has also announced plans for 14,000 new homes in Woodlands North Coast and Sembawang North, in addition to the existing plan for 10,000 new homes in Woodlands. Plans are also in the pipeline for 8,600 new homes to be added to Yishun and Sembawang between 2024 and 2029

The other significant development in the North Region is the Johor Bahru-Singapore Rapid Transit System (RTS), scheduled to commence in end-2026.

We have conducted research on the potential impact and scenarios, held conversations with our retailers and F&B operators and kept close watch on the situation.

We believe Causeway Point is well-positioned as the connection hub in the Woodlands region for the RTS travellers and the working population, in addition to the residential catchment. Causeway Point is well connected to a regional bus interchange and the Woodlands MRT station which serves as the interchange station for the North-South Line and the ThomsonEast Coast Line. The RTS station in Singapore will be connected to the Woodlands North Station on the Thomson-East Coast Line, which is one station away from Causeway Point. We anticipate higher shopper traffic through Causeway Point with the rise in residential and commuter traffic. This gives us the opportunity to enhance the retail and F&B offerings with the rise in shopper traffic and improved spending capacity.

In summary, we believe the upside opportunities from the upcoming developments and increase in working population and residential catchment in the North Region will outweigh the downside risk from the retail sales loss to Johor Bahru. We are confident that our two malls in the North - Causeway Point and Northpoint City – will remain resilient and continue to do well in the long run.

FCT AR24: https://links.sgx.com/FileOpen/Annual_Re...eID=828582