Frasers CentrePoint Trust

[corydorus]

They are planning to acquire assets in Australia, share price tanked over the past week
http://sbr.com.sg/commercial-property/ne...pansion-ji

this is certainly not welcoming as we know the strength of FCT lies from its conservative balance sheet and defensive nature of its portfolio... I wonder what's the motive behind this....

At the AGM last week, the CEO guided that if they diversify outside Singapore, they plan to keep Sgp assets as a core of not less than 80%.

The timing is perfect for Australia as the AUD currency is at very weak level. There is also room for gearing and SG Macro is going through a rough patch.

[opmi]

Just went to Changi City Point today. Cold Storage supermarket is moving out.
Dont know if this is old news.

[MINX]

Just went to Changi City Point today. Cold Storage supermarket is moving out.
Dont know if this is old news.

Not sure about the freshness, but definitely not positive news 

[swakoo]

Just went to Changi City Point today. Cold Storage supermarket is moving out.
Dont know if this is old news.

Thanks for the anecdotal observation - one of the advantages of analysing shopping mall reits is that one can literally go and get a feel for how the business is doing.

The occupancy at end 2015 was just 88.6%. Right now the adjacent Expo station is on a spur line off the East-West line, running from Tanah Merah to Changi Airport - see map below. Hence though on an mrt line, connectivity is not great and patrons are probably mainly Expo visitors or Changi Biz Park people only. And the upcoming Jewel at T3 will provide potential competition though it is likely targeted at a different crowd.

However next year when the DTL3 opens, connectivity will be much improved with potential traffic coming from SUTD and housing estates to the north - see map below. Last quarter, the rental reversion for 21.1% of the mall NLA (25 contracts; 43,627 sq ft) was a whopping 15.4% in spite of the weak retail and economic environment. Perhaps, a sign of tenants looking out to the improved connectivity in 2017.

Further down the road, the DTL3 extension running south to Xilin and Sungei Bedok is slated to open in 2024 and will further improve connectivity with Expo being connected to the east coast areas (which are served by the final phase of the Thomson East Coast line) - see map below. This should open up a whole new set of visitors.

[zerobeta]

Earlier this year the share price tanked after FCL comment that Australia malls maybe injected into FCT.
now the CEO of FCT himself who said that FCT is going to expand into Australia.
http://www.straitstimes.com/business/com...o-cut-risk

Share price hasn't reacted so far...

also I would like to know, do unitholders get to vote to block/ allow any plans of acquisition/ divestment? What is the required % of vote to allow such plans to go through? FCL basically is the largest shareholder of FCT (~40%), and they may hold more shares through other nominees.

[weijian]

Mercatus bought it 10 years ago for 1.65bil. Based on current valuation (2.08bil), looking at a ((2.08-1.65)/1.65) = 26% capital gain. Over 10 years and accounting for the leverage (lets say 50%) and also 1% nett interest cost on the debt, looking at ~(26/10)*2 - 1% = 4.2% CAGR - The gains are decent but only after leverage though. Mercatus might have overpay then?

Now back to FCT. With this purchase, the brokerages are crowning it as the King of Spore Suburban malls. Its leverage has increased to 38% and thanks to MAS's relaxation of the gearing limit to 50% a couple of years back, it is able to comfortably make this acquisition entirely based on debt.

FCT, Frasers Property team up to acquire 50% stake in Nex

The Nex retail mall, which has a total net lettable area (NLA) of about 634,631 square feet (sq ft), was valued at S$2.08 billion as at Dec 31, 2022.

FCT will fork out S$340 million – including related transaction fees – for its 51 per cent share of the joint acquisition. FCT’s manager said this will be financed by a mix of debt and existing cash resources.

Post-acquisition, FCT’s aggregate leverage is expected to rise to 38.5 per cent, from 33 per cent previously. Based on Nex’s net property income (NPI) in 2022, the NPI yield of the transaction works out to be “in the region of high 4 per cent”, FCT and FPL said in a joint statement.

https://www.businesstimes.com.sg/compani...-stake-nex

Mercatus Co-operative purchase back in July 2012, values the mall at $1.65 billion
https://singaporepropertyhighlights.word...50-of-nex/

[swakoo]

Mercatus bought it 10 years ago for 1.65bil. Based on current valuation (2.08bil), looking at a ((2.08-1.65)/1.65) = 26% capital gain. Over 10 years and accounting for the leverage (lets say 50%) and also 1% nett interest cost on the debt, looking at ~(26/10)*2 - 1% = 4.2% CAGR - The gains are decent but only after leverage though. Mercatus might have overpay then?

Mercatus has a half stake only and the sale is actually at a 21% discount to what it paid in 2012. The current valuation probably includes some debt in it. Whether Mercatus made a gain or loss probably depends on how much income it derived over the 10 years.

https://www.mingtiandi.com/real-estate/r...-for-497m/

[weijian]

Mercatus bought it 10 years ago for 1.65bil. Based on current valuation (2.08bil), looking at a ((2.08-1.65)/1.65) = 26% capital gain. Over 10 years and accounting for the leverage (lets say 50%) and also 1% nett interest cost on the debt, looking at ~(26/10)*2 - 1% = 4.2% CAGR - The gains are decent but only after leverage though. Mercatus might have overpay then?

Mercatus has a half stake only and the sale is actually at a 21% discount to what it paid in 2012. The current valuation probably includes some debt in it. Whether Mercatus made a gain or loss probably depends on how much income it derived over the 10 years.

https://www.mingtiandi.com/real-estate/r...-for-497m/

Hi swakoo,
I am using the property valuation in 2012 and 2023 to do the difference and normalizing it to percentages, so it can ignore the %stake.

For 2012, I am assuming 1.65bil is the property valuation (independent of debt) and so the 825mil is probably the enterprise value (cash paid + debt)

From the business times article (2023), if we assume all the net working capital (receivables/payables/PPE/taxes etc) to be net 100mil, then we can roughly tabulate the debt:

NAV = property valuation (non current asset) + 100mil (net working capital) - debt (remaining liabilities)
debt =  property valuation (non current asset) - NAV - 100mil = 2.08bil - 1.31bil - 0.1bil =  0.67bil (670mil)

[swakoo]

Hi swakoo,
I am using the property valuation in 2012 and 2023 to do the difference and normalizing it to percentages, so it can ignore the %stake.

For 2012, I am assuming 1.65bil is the property valuation (independent of debt) and so the 825mil is probably the enterprise value (cash paid + debt)

From the business times article (2023), if we assume all the net working capital (receivables/payables/PPE/taxes etc) to be net 100mil, then we can roughly tabulate the debt:

NAV = property valuation (non current asset) + 100mil (net working capital) - debt (remaining liabilities)
debt =  property valuation (non current asset) - NAV - 100mil = 2.08bil - 1.31bil - 0.1bil =  0.67bil (670mil)

Hi weijian, 

Thanks for clarifying. Think i misspoke about the current valuation and debt. My perspective is simply:

Mercatus paid S$825mil in 2012 for the Nex stake.
Mercatus sold stake in 2023 for S$652.5 mil.
To this capital loss, add in income distributions received from the stake over the 10 years, to derive the net result.

[weijian]

Mercatus paid S$825mil in 2012 for the Nex stake.
Mercatus sold stake in 2023 for S$652.5 mil.
To this capital loss, add in income distributions received from the stake over the 10 years, to derive the net result.

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.