FCT, Frasers Property team up to acquire 50% stake in Nex

THE manager of Frasers Centrepoint Trust (FCT) and sponsor Frasers Property Limited (FPL) announced on Thursday (Jan 26) the joint acquisition of a 50 per cent stake in suburban mall Nex for S$652.5 million.

The stake was bought from a subsidiary of NTUC unit Mercatus Co-operative, which had put it on the auction block back in June 2022.

FCT and FPL will buy Mercatus’ 50 per cent interest in Gold Ridge, which owns, manages and operates Nex. The purchase consideration takes into account Gold Ridge’s adjusted net asset value (NAV) of S$1.31 billion as at Sep 30, 2022.

The Nex retail mall, which has a total net lettable area (NLA) of about 634,631 square feet (sq ft), was valued at S$2.08 billion as at Dec 31, 2022.

FCT will fork out S$340 million – including related transaction fees – for its 51 per cent share of the joint acquisition. FCT’s manager said this will be financed by a mix of debt and existing cash resources.

Post-acquisition, FCT’s aggregate leverage is expected to rise to 38.5 per cent, from 33 per cent previously. Based on Nex’s net property income (NPI) in 2022, the NPI yield of the transaction works out to be “in the region of high 4 per cent”, FCT and FPL said in a joint statement.

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The rationale for the acquisition was that Nex is a high-quality asset with excellent connectivity, according to FCT. Located at Serangoon Central, the mall is integrated with Serangoon Bus Interchange and Serangoon MRT station, and is one of the largest suburban retail malls in Singapore. The property’s committed occupancy as of Nov 30 was 99.9 per cent.

The acquisition is also in line with FCT’s investment strategy, allowing for diversification and enhancing its market position in the suburban retail sector. Nex will be accretive to distributions per unit (DPU), with a projected increase from 12.227 cents to 12.291 cents or 0.5 per cent higher.

FCT reported that shopper traffic and tenant sales across its portfolio for the first quarter of FY2023 ending Dec 31 continued to grow. Shopper traffic grew 38.3 per cent year on year (yoy) while tenant sales grew 13.4 per cent yoy for the quarter.

Shopper traffic in 2022 averaged about 80 per cent of pre-Covid levels, but tenant sales are 12 per cent above pre-Covid levels according to FCT. This represents a trend of mall visitations becoming more purposeful, said FCT.

Overall, FCT’s retail portfolio saw improved committed occupancy, barring Causeway Point and Northpoint City North Wing, which saw a 0.1 per cent decrease and no change, respectively. Changi City Point saw the biggest improvement in committed occupancy, up 4.1 per cent yoy. Hougang Mall and Northpoint City North Wing are the only properties in FCT’s portfolio to have 100 per cent occupancy. (*see amendment note)

FCT’s weighted average lease expiry as of Dec 31 2022 is 1.9 years by net leasable area and 1.8 years by gross rental income.

*Amendment note: A previous version of this story incorrectly stated that only Hougang Mall had 100 per cent occupancy.