Frasers Commercial Trust Q1 DPU stable at 2.51 cents
Singapore
FRASERS Commercial Trust (FCOT) posted stable distribution per unit (DPU) of 2.51 cents for the fiscal first quarter ended Dec 31, 2016, and announced a S$45 million makeover for Alexandra Technopark that will commence in mid-2017.
Its fiscal Q1 DPU was unchanged from a year ago, even though no management fees were taken in units this time compared to some 23 per cent of the management fees in the year-ago period being taken in units.
Jack Lam, CEO of the Reit manager, noted that the stability and diversification of the portfolio has been bolstered by the acquisition of 357 Collins Street in August 2015, which is enjoying full occupancy in a strong Melbourne market and has no leases expiring until fiscal 2018.
Gross revenue for the quarter held steady at S$39.68 million, compared to S$39.62 million a year ago. But net property income (NPI) for quarter dipped marginally by 0.6 per cent year on year to S$29.2 million, dragged by lower occupancy rates for China Square Central 1 and Central Park as well as higher marketing expenses for Central Park.
"Stable results for the first quarter has given us a good start to the financial year," Mr Lam said. "However, we are aware that market conditions are overall anticipated to remain challenging for some time." The Reit manager will look for ways to improve and reposition the properties to keep them competitive and enhance long-term income potential, he added.
Shedding details of the asset enhancement initiative (AEI) for Alexandra Technopark, the Reit manager said this will "create a new campus environment that will provide a stimulating and inspiring work environment for the working community".
There will be more community-friendly spaces, and new amenities such as futsal courts, exercise areas, and end-of-trip facilities for cyclists will be introduced, with certain areas within Alexandra Technopark to be designated as car-free zones. Another new feature will be farming plots for tenants to grow their own greens.
"On the backdrop of a challenging business environment and competitive landscape for the business space sector in Singapore, this is an opportune time to rejuvenate and reposition Alexandra Technopark," Mr Lam said.
It is expected that tenants at Alexandara Technopark will be able to operate with minimal disruption during the AEI, which will complete around mid-2018, as construction work will be carried out in phases and involve primarily common areas.
FCOT's Singapore portfolio also includes China Square Central and 55 Market Street; its Australian portfolio comprises 357 Collins Street in Melbourne, Caroline Chisholm Centre in Canberra and Central Park in Perth. The six properties are valued at about S$2 billion. As of Dec 31, 2016, the average occupancy of the whole portfolio was 93 per cent. Income-weighted average lease expiry was 3.8 years as of end-2016. Caroline Chisholm Centre continues to anchor the portfolio with its long WALE of 8.5 years.
At China Square Central, the development of a 16-storey hotel and renovations in the commercial component are in progress. The loss of income in the fiscal first quarter stemmed from certain affected retail and shophouse units, which will be supplemented by a capital distribution of S$900,000 of proceeds from selling the hotel development rights.
As of end-2016, the Reit's gearing stood at 36 per cent, with an interest coverage ratio of 4.6 times. No refinancing is required until September and 85 per cent of gross borrowings are on fixed rates.
The distribution payment date for the fiscal first quarter is March 1. Units of FCOT closed 0.5 cent down at S$1.28 on Monday.
