Frasers Centrepoint Trust to divest Changi City Point for $338 mil

The manager says it intends to lower its aggregate leverage and average cost of borrowings with the proceeds.

The manager of Frasers Centrepoint Trust (FCT) J69U announced that it will be divesting Changi City Point for a consideration of $338 million in cash. The consideration was negotiated on a willing-buyer-willing-seller basis after taking into account the property’s independent valuation of $325.0 million as at July 31.

The REIT’s trustee, HSBC Institutional Trust Services (Singapore), had entered into a sale and purchase agreement with an unrelated third party on Aug 30.

The divestment is expected to be completed on Nov 15. Upon completion, the REIT is estimated to net approximately $329.7 million in proceeds, after accounting for the divestment fee, divestment-related expenses and the transfer of tenants’ security deposits.

According to the REIT manager, it intends to use the net proceeds to repay its loans with higher interest rates and reduce FCT’s pro forma aggregate leverage as at June 30 from 40.2% to 37.1%.

“This divestment is part of our strategic portfolio review to strengthen FCT’s portfolio resilience and is in line with our long-term objective to create value for FCT’s unitholders. The estimated net gain and capital gain are approximately $10.9 million and $20 million, respectively,” says Richard Ng, CEO of the manager.

In addition to lowering FCT’s aggregate leverage, Ng notes that the move will also reduce its average cost of borrowings for the nine-month period ended June 30. The divestment is also said to improve the REIT’s hedge ratio of fixed-rate loans from 63% to 73%, each on a pro forma basis.

Portfolio-wise, the divestment is expected to lift FCT’s committed occupancy rate, average gross rent per square foot, the REIT’s tenants’ sales per square foot and the average remaining lease tenure of the retail portfolio.

“These put FCT in a stronger position to focus on our core suburban retail strategy going forward,” he continues.

Changi City Point is a retail mall located at 5 Changi Business Park Central 1. The building has three storeys and one basement level and is connected to the Expo MRT station on the East West and Downtown Lines. It has a net lettable area (NLA) of 19,366 sqm (208,453 sq ft).

Upon completion of the divestment, FCT’s retail portfolio will comprise nine retail properties, all located in the suburban regions of Singapore. Its retail property portfolio will have an aggregate net lettable area of approximately 2.7 million square feet with a strong focus on essential trades and services.

As at 9.46am, units in FCT are trading flat at $2.21.

See Also: