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Not to be cynical here but FCL can lower its gearing rather easily.
As of now, it has 400M recurring income from REITS and Asutraland and the collection of cash from its Singapore residential projects. If one notices, FCL has a lot of trade and other receivables as well as $5 Billion worth of "properties held for sale"; Majority of its Singapore development projects will be completed by 2016, with the cash collected, FCL will be able to pare down their debts quickly.
In addition, if FCL needs to pare down gearing urgently, it can look no further than throwing its "valuable assets" to one of its REITS. FCL still holds valuable properties like The centrepoint* (worth s$650M) and Northpoint & Waterway point (still underdevelopment) which can be easily sold off to Fraser Centrepoint trust. Similarly, it has office complexes such as Alexandra Point ($289M), Changi City Office and 51 Cuppage Road which can be offloaded to Fraser Commercial.
During each financial year, it can help its REIT "grow" by selling off a property to them. I am sure many unit holders of FCPT (gearing 29.3%) and FCT (gearing 37.2%) will be happy to know that their REITS are growing the asset portfolio and at slightly "yield accretive rates" in times of market condition where the cost of debt financing is cheap. Furthermore as FCL holds less than 50% shareholdings of each trust, their accts are not consolidated if I am right. In the end, FCL will look like a very asset light/debt free company which gets recurring income of s$400m.
I believe that is the intent of the chairman where he intends to position FCL to be an asset light company by spinning off its investment properties after completion. FCL looks to be in the position of Capitamall Asia/Capitaland and I believe it may end up being delisted as soon as its investment properties receive TOP.
*For the Centrepoint, my gut feel is that it will be sold to FCPT only when new tenants come in because its occupancy is now at the low 60%. It is likely to only happen in late 2015 or 2016 where FCPT occupancy returns to above 95%. In addition, The Centerpoint is part freehold property^, so it is possible for the freehold portion to be sold to FCPT on a 99 year lease, similar to Paragon. After all, what would Fraser Centrepoint trust be without "The Centrepoint" in its portfolio
(not vested in any fraser stocks)
* Also I notice there are some posts on Eastpoint Mall. I will like to highlight East Point mall is owned by NTUC income but managed by Fraser, so the financial impact of lower occupancy is not too much of an issue for Fraser.
^To follow up on Thor666 Statement, it is part owned by URA if I am right. I checked the land ownership on Onemap. Think URA may have subleased to FCL (Land Lot: TS27-00854M). For others info, Changi City point is JTC owned but FCPT has a sublease of 60 years
As of now, it has 400M recurring income from REITS and Asutraland and the collection of cash from its Singapore residential projects. If one notices, FCL has a lot of trade and other receivables as well as $5 Billion worth of "properties held for sale"; Majority of its Singapore development projects will be completed by 2016, with the cash collected, FCL will be able to pare down their debts quickly.
In addition, if FCL needs to pare down gearing urgently, it can look no further than throwing its "valuable assets" to one of its REITS. FCL still holds valuable properties like The centrepoint* (worth s$650M) and Northpoint & Waterway point (still underdevelopment) which can be easily sold off to Fraser Centrepoint trust. Similarly, it has office complexes such as Alexandra Point ($289M), Changi City Office and 51 Cuppage Road which can be offloaded to Fraser Commercial.
During each financial year, it can help its REIT "grow" by selling off a property to them. I am sure many unit holders of FCPT (gearing 29.3%) and FCT (gearing 37.2%) will be happy to know that their REITS are growing the asset portfolio and at slightly "yield accretive rates" in times of market condition where the cost of debt financing is cheap. Furthermore as FCL holds less than 50% shareholdings of each trust, their accts are not consolidated if I am right. In the end, FCL will look like a very asset light/debt free company which gets recurring income of s$400m.
I believe that is the intent of the chairman where he intends to position FCL to be an asset light company by spinning off its investment properties after completion. FCL looks to be in the position of Capitamall Asia/Capitaland and I believe it may end up being delisted as soon as its investment properties receive TOP.
*For the Centrepoint, my gut feel is that it will be sold to FCPT only when new tenants come in because its occupancy is now at the low 60%. It is likely to only happen in late 2015 or 2016 where FCPT occupancy returns to above 95%. In addition, The Centerpoint is part freehold property^, so it is possible for the freehold portion to be sold to FCPT on a 99 year lease, similar to Paragon. After all, what would Fraser Centrepoint trust be without "The Centrepoint" in its portfolio
(not vested in any fraser stocks)
* Also I notice there are some posts on Eastpoint Mall. I will like to highlight East Point mall is owned by NTUC income but managed by Fraser, so the financial impact of lower occupancy is not too much of an issue for Fraser.
^To follow up on Thor666 Statement, it is part owned by URA if I am right. I checked the land ownership on Onemap. Think URA may have subleased to FCL (Land Lot: TS27-00854M). For others info, Changi City point is JTC owned but FCPT has a sublease of 60 years