FCOT to acquire Melbourne office building for A$222.5m, develop hotel in Singapore's China Square Central

FRASERS Commercial Trust (FCOT) has entered into a conditional sale and purchase agreement with Australand Property Holdings to acquire a commercial property in Melbourne for A$222.5 million (S$232 million).

This marks its first foray into Melbourne's CBD office market, which is the second largest office market in Australia.

The acquisition at 357 Collins Street, an office building with Grade A specifications, will increase FCOT's portfolio size by 14.2 per cent to S$2 billion as at March 31, 2015. It is expected to provide distribution per unit accretion to unit holders.

The property is a 25-storey freehold office building with a total net lettable area of 31,920 square metres (sq m), which includes retail space of 1,825 sq m. As at end March, it had an occupancy rate of 95.5 per cent and a long weighted average lease expiry of six years.

The deal will be financed via a mix of equity and debt financing.

In addition, FCOT has entered into a conditional agreement with an entity of Frasers Centrepoint (FCL) to build a 16-storey hotel in China Square Central. This will allow FCOT to realise the value of 16,000 sq m of gross floor area in China Square Central. As part of the project, new lettable spaces will also be created, with better frontage and visibility.

A long lease of the hotel will be granted to Frasers Hospitality China Square Trustee (FHCS) after the temporary occupation permit is issued for the hotel - to be operated under the "Capri by Fraser" brand - and commercial projects. FHCS Trustee will pay S$44.8 million for the lease. The net proceeds from the lease are estimated at S$44.4 million.

Low Chee Wah, chief executive of FCOT's manager Frasers Centrepoint Asset Management (Commercial), said that the hotel development project would help unlock the value of the additional gross floor area and minimise FCOT's exposure to development risks.