03 Sep 2020
SINGAPORE, 3 SEPTEMBER 2020
Frasers Centrepoint Asset Management Ltd. (“FCAM”), the manager of FCT (FCAM as manager of FCT, the “Manager”) is pleased to announce the proposed acquisition of the remaining approximately 63.1% of the total issued share capital of AsiaRetail Fund Limited (“ARF”, and the acquisition, the “ARF Acquisition”) for approximately S$1,057.4 million from a wholly-owned subsidiary of Frasers Property Limited, the sponsor of FCT (“FPL” or the “Sponsor”).
Mr Richard Ng, Chief Executive Officer of FCAM said, “This transaction is a follow-through of our strategy to increase FCT’s stake in ARF. We acquired the initial 17.1% stake in ARF in April 2019, followed by acquisitions of additional interest that increased FCT’s stake to the current 36.9% when the opportunity presented itself. The acquisition of the remaining 63.1% stake is the final step to carry that strategy to fruition.
Upon completion of the Transactions, FCT’s retail properties in its portfolio will increase from seven to 118, and its net lettable area will expand by about 64% 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$6,650 million. Post the proposed Equity Fund Raising (as defined below), FCT is expected to be among the top ten largest S-REITs by market capitalisation.”
ENLARGED SCALE WITH PORTFOLIO GROWTH AND DIVERSIFICATION
ARF’s portfolio of suburban retail malls shares similar characteristics to FCT’s malls, which includes the focus on Essential Services5, being located in populous residential areas and above or near transportation nodes. ARF’s Singapore portfolio includes five retail malls: Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1 (the “ARF Singapore Retail Assets”) and one office property Central Plaza (together with the ARF Singapore Retail Assets, the “ARF Singapore Assets”, see Appendix). The total agreed property value of the ARF Singapore Assets is S$3,065 million9.
The enlarged retail portfolio10 (the “Enlarged Retail Portfolio”) will have a diversified asset base and reduced concentration risk from any single asset. The single largest asset would represent no more than 22% of the aggregate value of the Enlarged Retail Portfolio compared to around 30% now.
With the Enlarged Retail Portfolio, FCT will be in a stronger competitive position in both physical and omnichannel retail spaces. It will continue to leverage its broad catchment population, its accessibility from neighbouring residences, and the trend of working from home to serve as fulfillment hubs for Essential Services5 and F&B for consumers.
SUBURBAN MALLS REMAIN AN ATTRACTIVE ASSET CLASS
The addition of the ARF Singapore Retail Assets to FCT’s portfolio will boost the overall catchment population by 40% to approximately 3.0 million3. The catchment population is supported by a diversified base of more than 1,500 leases across the 11 malls in the Enlarged Retail Portfolio. The Enlarged Retail Portfolio derives 53.6% of its total gross rental income from the Essential Services5 sector, which will continue to underpin FCT’s resilience and relevance to its consumers.
Since the commencement of Phase 2 of Singapore’s re-opening on 19 June 2020, more than 99% 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 have recovered to between 60% and 70% of last year’s level. Similarly, portfolio tenants’ sales in July 2020 has recovered to between 97% and 99% of last year’s level. The pace of the recovery has demonstrated the resilience of suburban retail malls through challenging times.
Prior to FCT’s proposed ARF Acquisition, ARF will be divesting Mallco Pte. Ltd., a wholly-owned subsidiary of ARF which holds Setapak Central, a retail mall in Malaysia, for a sale price of approximately S$39.7 million, to a wholly-owned subsidiary of the Sponsor. Hence, the Enlarged Retail Portfolio will not include Setapak Central, and this is in line with FCT’s current strategy to grow its portfolio of Singapore assets.
As part of its proactive portfolio management strategy, the Manager is also seeking to divest Bedok Point (the “Bedok Point Divestment”) for a sale price of S$108.0 million11. The Manager believes that the proposed Bedok Point Divestment will benefit Unitholders as it allows FCT to unlock value and redeploy it to acquire higher yielding assets with larger scale.
PROPOSED EQUITY FUND RAISING AND COMMITMENT OF THE SPONSOR
The Manager proposes an equity fund raising (“Equity Fund Raising”) to raise approximately S$1.3 billion12. The Equity Fund Raising may comprise a private placement (the “Private Placement”) of new FCT units (the “New Units”) to institutional and other investors and/or a non-renounceable preferential offering of New Units to the existing Unitholders on a pro rata basis (the “Preferential Offering”). The Manager expects to use the net proceeds from the Equity Fund Raising to fund the total cost of the proposed ARF Acquisition and to pare down existing indebtedness.
To demonstrate its support for FCT, the Sponsor has provided an irrevocable undertaking that, in the event the Equity Fund Raising comprises a Private Placement, the Sponsor and its subsidiaries (the “Sponsor Group”) will subscribe for such number of New Units under the Private Placement allocated to it up to its proportionate pre-placement unitholdings in FCT. The Sponsor has also undertaken that in the event the Equity Fund Raising comprises a Preferential Offering, the Sponsor will procure that its wholly-owned subsidiaries subscribe for their pro rata share of the New Units and apply and subscribe for excess New Units in the Preferential Offering, such that the total number of New Units applied for by its subsidiaries under the Preferential Offering is equivalent to 100% of the total number of New Units in the Preferential Offering.
Based on FY2019 pro forma, these Transactions upon completion are expected to provide an 8.59%6 DPU accretion. This is in line with FCT’s objective to deliver long-term steady returns to its Unitholders.
The proposed Transactions are subject to the approval of Unitholders of FCT at an extraordinary general meeting to be convened by way of electronic means on 28 September 2020 and all other relevant conditions specified in the announcements and the Circular relating to these Transactions.
This press release is to be read in conjunction with FCT’s announcements and the Circular available on FCT’s website on https://www.frasersproperty.com/reits/fct.
1 Prior to 1 September 2020, AsiaRetail Fund Limited was known as PGIM Real Estate AsiaRetail Fund Limited
2 Based on 3km catchment. Source: The Independent Market Research Report by Cistri Pte. Ltd.
3 Excludes Bedok Point and Setapak Central
4 As at 30 June 2020, on a pro forma basis
5 The groupings of essential and non-essential services are based on Ministry of Trade and Industry’s press release on 21 April 2020
Note that the individual product group may not align perfectly to the announced Essential Services
6 Pro forma effects of the proposed Transactions (as defined herein) for FY2019. “Transactions” means the proposed ARF Transaction, the proposed Equity Fund Raising, the proposed Sponsor Placement the proposed Whitewash Resolution and the proposed Bedok Point Divestment, each as described in the circular to Unitholders dated 3 September 2020 (the “Circular”)
7 Financial year ended 30 September 2019
8 Excludes Bedok Point
9 Approximately the aggregate of the averages of the two independent valuations of each ARF Singapore Asset as at 1 August 2020
10 Excludes Bedok Point and Central Plaza
11 The valuation of Bedok Point was conducted on the basis of Bedok Point as a redevelopment site, assuming that the change of use/rezoning of Bedok Point to “Residential with Commercial on 1st Storey” is approved and the land lease can be topped up to 99 years subject to payment of lease renewal premium
12 Based on the illustrative issue of 585,585,586 New Units and an illustrative issue price of S$2.22 per New Unit. The structure and timing of the proposed Equity Fund Raising have not yet been determined by the Manager, and are subject to, among others, prevailing market conditions. The Manager will announce the details of the proposed Equity Fund Raising on the SGXNET at the appropriate time