HSBC Institutional Trust Services (Singapore), the trustee of Frasers Centrepoint Trust (FCT), has entered into a sales and purchase agreement to divest 143.9 million units in Malaysia’s Hektar Real Estate Investment Trust (Hektar Reit) for RM128.1 million (S$37.4 million) to unrelated third parties, the trust’s manager said on Friday (Sep 22).

Hektar Reit is a Malaysia retail-focused Reit listed on the mainboard of Malaysia’s stock exchange, Bursa Malaysia.

FCT currently holds 30.7 per cent of the total number of Hektar Reit units in issue. This represents 154.5 million units of a total of 498.8 million units.

Following completion of the divestment, FCT will hold 2.1 per cent of the total number of Hektar Reit units in issue, which adds up to about 10.6 million Hektar Reit units. The trust’s manager said it intends to divest these remaining Hektar Reit units “in due course”.

The divestment consideration was negotiated on a willing-buyer and willing-seller basis, after taking into account the closing price of RM0.60 per Hektar Reit unit on Bursa Malaysia as at Sep 22.

The consideration represents a premium of approximately 48.3 per cent over the Reit’s closing price, and a discount of approximately 26.9 per cent to Hektar Reit’s net asset value per unit of RM1.217 (S$0.36) as at Jun 30, said the trust’s manager.

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As at Aug 31, the Hektar Reit units for sale had a book value of S$0.29 per unit.

The purchaser will pay the sum of approximately RM1.28 million – equivalent to 1 per cent of the divestment consideration – to FCT’s trustee as earnest deposit, said the trust’s manager.

The balance of the divestment consideration will be paid to FCT’s trustee on completion of the divestment, it added. The entire consideration will be paid by the purchaser in cash.

Net proceeds from the divestment will be approximately S$37.1 million, said the trust’s manager, after taking into account the S$200,000 divestment fee and other divestment-related expenses of around S$100,000.

On the rationale for the divestment, the trust’s manager said FCT’s unitholding in Hektar Reit is non-core to its portfolio and investment strategy.

“The divestment enables FCT to recycle the net proceeds to be deployed for capital management, working capital and/or investments that are consistent with its core suburban retail strategy,” it said.

The divestment is expected to be completed in the fourth quarter of 2023.

The trust’s manager added that the divestment is not expected to have any material impact on the net tangible assets or distributions per unit of FCT and its subsidiaries for the financial year ending Sep 30, 2023.

Units of FCT closed S$2.18 on Friday, down S$0.02 or 0.9 per cent, before the announcement.