Heading for SGX this June could be a S$900m Frasers Reit (Amended)

Singapore

AFTER much market talk, work seems to finally be underway for Frasers Centrepoint (FCL) to spin off some of its Australian logistics and industrial assets into a real estate investment trust (Reit).

The Reit could be worth S$800 million to S$900 million, and the listing on the Singapore Exchange (SGX) could be slated for June this year, barring unforeseen circumstances, The Business Times understands.

DBS and Citi are leading the offering as global co-ordinators, with other banks such as OCBC, United Overseas Bank and Morgan Stanley also involved.

This would be FCL's fourth Reit listing on the local bourse. It is also the sponsor and manager of three other Reits: Frasers Centrepoint Trust which owns local suburban malls and is looking to enter Australia; Frasers Commercial Trust which owns offices in Singapore and Australia; and Frasers Hospitality Trust which owns hotels and serviced residences globally.

The new Reit will likely be called Frasers Logistics and Industrial Trust (FLT). Singapore was chosen as a listing destination over Australia because of better tax treatment here, a source told BT. Singapore Reits enjoy tax exemption on qualifying foreign-sourced income from overseas properties.

A special feature of FLT is that investors can choose to take their distributions in Australian dollars or Singapore dollars. Its assets would comprise industrial and logistics properties - mostly from Frasers Property Australia's (FPA, formerly Australand) portfolio.

That said, the Reit has the mandate to acquire other kinds of industrial assets (for example, business parks) from third parties as well. More than 50 properties could make up the Reit's initial portfolio.

FCL had purchased FPA for A$2.6 billion (S$3 billion at the time) in 2014. As at Dec 31, 2015, FPA's investment portfolio included some S$1.6 billion in industrial assets.

The closest comparable to FLT on the Singapore exchange would be Ascendas Reit (A-Reit), especially after the latter bought a huge A$1 billion portfolio of logistics properties in Australia from GIC and FPA last November.

FLT had mulled a listing earlier this year, but decided against it when markets were whipsawed by volatility.

The FTSE ST Reits Index plunged 4.6 per cent from Jan 5 to Jan 21. At that time, A-Reit was trading at a yield of 7.5-7.6 per cent, which would have been hard to match.

FCL, being a smaller and less-established industrial sponsor than Ascendas, would probably have had to offer returns exceeding A-Reit's yield to be deemed attractive.

In February, FCL said it was "currently reviewing and exploring the proposal of establishing a Reit to be listed on the Mainboard ... as one of the various strategic options available to the company to optimise and unlock value from its assets, including Australian industrial assets". It was responding to a Bloomberg report on a potential listing.

Recent Mainboard listings on the Singapore Exchange have all been Reits - and Reits with foreign assets at that. Last year's only Mainboard addition was BHG Retail Reit, which owns malls in Chinese cities. It was valued at about S$120 million.

Last week, Canadian financial services group Manulife published its preliminary prospectus in a second listing attempt after a foiled one in July 2015. If successful, the Reit will own three US office properties.

It is looking to raise up to about US$470 million. The public offer is expected to open from May 12 to May 18, with trading starting on May 20.

OCBC research head Carmen Lee said it is not surprising that recent Reit aspirants have all been those with foreign assets.

"What can be 'reited' in Singapore has already been 'reited'," she explained. "There are limited properties here that you can still pool together to become a Reit. Even Singapore Reits are beginning to acquire overseas. The next phase of foreign-asset Reits is actually a natural progression."

FCL fell 4.5 cents or 2.7 per cent to S$1.645 on Friday. It is due to release its second-quarter financial results on Tuesday before the market opens.

Amendment note: An earlier version said FCL had bought FPA for A$2.6 million. It should be A$2.6 billion. We are sorry for the error.