Frasers Commercial Trust: Fiscal 4Q18 net property income falls on divestment, lower occupancy

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Frasers Commercial Trust reported its net property income for the fiscal fourth quarter fell 19.2 percent on-year to S$21.61 million on the divestment of the 55 Market Street property, lower occupancy at some properties and a weaker Australian dollar.

Gross revenue for the quarter ended 30 September fell 15.2 percent on-year to S$32.48 million, it said in a filing to SGX before the market open on Friday.

The distribution per unit (DPU) for the fiscal fourth quarter was 2.40 Singapore cents, down 0.4 percent from 2.41 Singapore cents in the year-earlier period, Frasers Commercial Trust’s manager said.

The trust saw lower occupancy rates for its China Square Central, Alexandra Technopark, Central Park and 55 Market Street properties, it said. Income from its Australian properties was also affected by the Australian dollar weakening from levels in the year-earlier quarter, it added.

The committed occupancy rate at China Square Central was 94.4 percent, at Alexandra Technopark it was at 70.2 percent, at Central Park it was 70.0 percent as of 30 September, it said.

The divestment of 55 Market Street for a consideration of S$216.8 million was completed on 31 August, with an estimated net gain of around S$75.7 million over its book value of S$139.9 million, it said, adding that “significantly reduced” to 28.3 percent after using the proceeds to repay debt.

“The divestment of 55 Market Street at a substantial gain unlocked significant value and helped to bring about higher financial flexibility to pursue future growth opportunities.,” Jack Lam, CEO of FCT’s manager, said in the statement.

For the full fiscal year, net property income fell 21.6 percent on-year to S$89.27 million, while gross revenue fell 14.8 percent to S$133.31 million, it said. The DPU for the full year was 9.60 Singapore cents, down 2.2 percent from 9.82 Singapore cents in the previous fiscal year, it said.

The portfolio value increased 3.0 percent on-year to S$2.1 billion, based on independent valuations as of 30 September, it said. The two Singapore properties has an average valuation increase of 6.3 percent on-year, while the three Australia properties reported an average valuation rise of 4.6 percent in Australian dollar terms and a 2.5 percent decrease in Singapore dollar terms due to Australian dollar weakness, it said.

“FY18 was a significant year as we executed several major initiatives to reshape and strengthen the portfolio for long-term growth. We expanded our investment mandate to Europe, and in January 2018 made an income-accretive investment in Farnborough Business Park,” Lam said.

“The revamp of Alexandra Technopark is nearing completion and has already garnered very encouraging feedback from tenants and other stakeholders. Likewise, we eagerly look forward to completing the rejuvenation of the retail podium at China Square Central in the later part of 2019,” he said.

A S$45 million asset enhancement initiative (AEI) was begun at Alexandra Technopark in January 2017, while the S$38 million AEI at China Square Central started in January 2018, it said. The net lettable area of China Square Central’s retail podium is expected to increase to around 78,000 square feet from 64,000 square feet, adding to its income generating potential, it said, adding it expected increased visitor numbers from the expected opening of the new 304-room Capri by Fraser hotel at China Square in March 2019.

Frasers Commercial Trust’s portfolio consists of China Square Central and Alexandra Technopark in Singapore; Caroline Chisholm Centre in Canberra, 357 Collins Street in Melbourne and a 50 percent indirect interest in Central Park in Perth; and a 50 percent indirect interest in Farnborough Business Park in the U.K., it said.

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