FCT to buy 24.5% stake in Nex from Frasers Property, to raise S$200 million in placement

FRASERS Property is selling its stake in retail mall Nex for an estimated price of S$523.1 million to Frasers Centrepoint Trust (FCT), said the manager Frasers Centrepoint Asset Management on Thursday (Jan 25).

The trustee of FCT, HSBC Institutional Trust Services, has entered into the share purchase agreement on behalf of FCT with the sponsor of FCT, Frasers Property.

Richard Ng, chief executive of the FCT manager, said: “The acquisition follows from our initial acquisition of 25.5 per cent in Nex in February 2023 and will raise FCT’s effective interest to 50 per cent on completion.”

The acquisition of Nex will be done via buying the total issued share capital of the sponsor’s unit FCL Emerald, which holds a 49 per cent interest in Nex Partners (NP) Trust. FCL Emerald also holds a 49 per cent stake in Frasers Property Coral, the trustee-manager of NP Trust.

NP Trust is a private trust which holds 50 per cent of the issued and paid-up share capital of Gold Ridge, which in turn holds the retail mall Nex – located at 23 Serangoon Central.

Upon completion of the acquisition, FCT will hold a 100 per cent interest in each of NP Trust and the NP trustee-manager, as well as an effective 50 per cent interest in Nex, with the acquired 24.5 per cent stake in Nex, said the manager.

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The manager also noted that the agreed property value of Nex is S$2.1 billion, an average between two independent valuations as at the end of last December. The net property income (NPI) yield based on the property’s NPI for the financial year ended Sep 30, 2023, and the agreed property value is about 4.8 per cent.

‘Excellent asset’

“Nex is an excellent asset with strong financial and operational performance, and is a strategic fit to FCT’s prime suburban retail portfolio,” said Ng, adding that the acquisition is also distribution per unit-accretive.

FCT’s portfolio comprises mainly suburban retail malls, including Causeway Point and Northpoint City’s North Wing.

The manager also highlighted that the proposed acquisition is subject to approval by unitholders at an extraordinary general meeting, the date of which will be determined later.

Of the S$523.1 million total cost of the acquisition, the acquisition price payable by the trustee is about S$321.3 million, and some S$196 million is the pro-rata share attributable to FCL Emerald’s stake in Gold Ridge, on top of other relevant fees and expenses.

The manager, at the same time, noted that the bank loans owed by Gold Ridge will not be discharged under the acquisition. It also said it will finance the total acquisition cost via net proceeds from a proposed private placement and debt financing.

In a separate filing on the same day, FCT’s manager proposed the private placement at an issue price of between S$2.16 and S$2.204 per unit to raise no less than S$200 million to partially fund the acquisition.

The proposed issue price range represents a discount of between about 1.8 and 3.8 per cent to the adjusted volume-weighted average price of S$2.2446 per unit, as well as between about 3.6 and 5.6 per cent to the volume-weighted average price of S$2.2871 per unit.

The manager said it intends to use the gross proceeds to repay existing debts, after partially funding the acquisition of the remaining 49 per cent stake in NP Trust and its trustee-manager.

On Jan 10, The Wall Street Journal reported that the majority owners of Frasers Property could put the company or some of its assets up for sale to raise capital to reduce debt burdens. The company refuted the news on Jan 12 saying that it is “not aware” of any discussions to sell the company or its assets.

Frasers Property said in a bourse filing on Thursday that it intends to use the net proceeds from the proposed transaction for working capital purposes, including repaying and servicing borrowings.

FCT : J69U 0% requested trading halt before market opened on the day. The counter of Frasers Property : TQ5 0% was trading down 0.5 per cent, or S$0.005, to S$0.935 as at 11.15 am on Thursday.