Will more S-Reits soon exit the local market?

WHEN the proposed privatisation of Frasers Hospitality Trust (FHT) was unveiled on May 14, I couldn’t help feeling rather disheartened – not with the terms of the transaction but with the stated rationale for the deal.

The decision to take FHT private, which came after a strategic review announced on Apr 23, seems to be based on a strong conviction on the part of its managers that the hospitality trust will face great difficulty growing its distributions per stapled security (DPS) and net asset value (NAV) in the face of a number of macroeconomic trends and structural factors.

In particular, higher interest rates since the Covid-19 pandemic have increased FHT’s debt costs, and weighed on the market value of its stapled securities. The relative strength of the Singapore dollar has also adversely affected FHT’s DPS and NAV, as 59 per cent of its nearly S$2 billion property portfolio is located outside of Singapore – in Australia, Japan, Malaysia and the United Kingdom.