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