Frasers Centrepoint Trust to raise up to S$1.39b to take over AsiaRetail Fund

FRASERS Centrepoint Trust (FCT) is proposing to raise up to S$1.39 billion in equity through a private placement and/or a preferential offering, to fund its acquisition of the remaining 63.1 per cent of AsiaRetail Fund (ARF) for S$1.06 billion from its sponsor Frasers Property.

ARF owns five retail malls in Singapore - namely, Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1 - as well as the Central Plaza office property.

ARF also owns Setapak Central, a mall in Kuala Lumpur, Malaysia. But ARF will divest this mall to Frasers property for a sale price of S$39.7 million before FCT acquires ARF, so FCT's enlarged portfolio will not include Setapak Central. This is in line with FCT's current strategy to grow its portfolio of Singapore assets, it said.

To fund the acquisition and pare down existing indebtedness, the Reit manager is proposing to issue up to 628 million new units in FCT, representing around 56.1 per cent of the total number of issued units.

Based on the illustrative issue price of S$2.22 per new unit, the proposed equity fund raising is expected to raise gross proceeds of up to S$1.39 billion.

Separately, FCT plans to divest Bedok Point to Frasers Property for a sale price of S$108.0 million, so that FCT can unlock value and redeploy it to acquire higher-yielding assets with larger scale, it said.

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On a pro forma basis, these transactions are expected to provide 8.59 per cent DPU (distribution per unit) accretion based on FCT's FY2019 financial statements.

Pro forma net asset value per unit would be S$2.22 as at Sept 30 2019, from S$2.21 as at Sept 30, 2019.

Upon completion of the transactions, FCT's retail properties in its portfolio will increase from seven to 11, and its net lettable area will expand by about 64 per cent to 2.3 million square feet, placing FCT among the largest suburban retail mall owners in Singapore.

FCT's portfolio size will increase to approximately S$6.65 billion, from S$3.96 billion.

Suburban malls remain an attractive asset class, FCT said: "Since the commencement of Phase 2 of Singapore's re-opening on June 19 (after the Covid-19 partial lockdown in April), more than 99 per cent of the retailers in the ARF Singapore retail assets and FCT's existing portfolio have resumed business.

"For both FCT and ARF portfolios, shopper traffic as at July 2020 has recovered to between 60 per cent and 70 per cent of last year's level. Similarly, portfolio tenants' sales in July 2020 has recovered to between 97 per cent and 99 per cent of last year's level.

"The pace of the recovery has demonstrated the resilience of suburban retail malls through challenging times."

The acquisition fee payable to the Reit manager for the proposed ARF acquisition is approximately S$19.3 million.

Stamp duties, professional fees and other expenses to be incurred in connection with the acquisition and the proposed equity fund raising are estimated at S$32.1 million.

FCT will convene an extraordinary general meeting on Sept 28 to seek FCT unit holders' approval for the proposed transactions.