• Aggregate portfolio net property income¹ grew 22.6% quarter-on-quarter and 17.4% year-on-year
• Portfolio committed occupancy continued to increase to 95.2%
• Gearing remained healthy and prudent at 29.0%
• Proposed merger with Frasers Logistics & Industrial Trust announced on 2 December 2019 and currently expected to complete in end-March/April 2020

SUMMARY OF FCOT’S 1QFY20 RESULTS

(1) The number of Units used to compute DPU was 916.6 million.

(2) The number of Units used to compute DPU was 912.7 million.

(3) The number of Units used to compute DPU was 897.9 million.

SINGAPORE, 15 JANUARY 2020

Frasers Commercial Asset Management Ltd. (the “Manager”), the manager of Frasers Commercial Trust (“FCOT”, SGX: Frasers Com Tr), wishes to announce a distribution to Unitholders of S$22.0 million for the financial quarter ended 31 December 2019³ (“1QFY20”). This translates to a Distribution per Unit (“DPU”) of 2.40 cents, unchanged from the previous quarter and 1QFY19.

The distribution to Unitholders of S$22.0 million for 1QFY20 was higher than distributions of S$21.9 million for 4QFY19 and S$21.6 million for 1QFY19.

The distribution for 1QFY20 will be paid out on 28 February 2020, with the distribution books closure date scheduled for 31 January 2020³. The Manager will not be applying the distribution reinvestment plan (“DRP”) for the 1QFY20 distribution⁴. For the avoidance of doubt, the distribution for 1QFY20 will be wholly in cash.

PORTFOLIO PERFORMANCE

1QFY20 portfolio gross revenue of S$37.8 million was 14.8% higher compared to 4QFY19 while net property income (“NPI”) of S$26.7 million increased by 23.0% on the same basis, mainly due to higher rental income for China Square Central⁵, Alexandra Technopark and 357 Collins Street and lower utilities expenses for Alexandra Technopark.

On a year-on-year basis, 1QFY20 portfolio gross revenue and NPI increased by 19.8% and 26.5% respectively, mainly due to higher rental income for China Square Central, Alexandra Technopark, Central Park and 357 Collins Street and lower utilities expenses for Alexandra Technopark, partially offset by the effects of the weaker average Australia Dollar.

The NPI figures above are before contribution from the 50.0% indirect interest in Farnborough Business Park (“FBP”) in the United Kingdom (“UK”), which is held as a joint venture and equity-accounted. The attributable NPI for FBP for 1QFY20 was S$2.3 million. Including the attributable NPI of FBP, aggregate portfolio NPI for 1QFY20 would be S$29.0 million, translating to growths of 22.6% and 17.4% over the corresponding figures for 4QFY19 and 1QFY19, respectively.

Mr. Jack Lam, CEO of the Manager said, “The quarter saw aggregate portfolio gross revenue and NPI improving significantly compared with the preceding quarter and also on a year-on-year basis, a clear indication that tangible results are beginning to come forth from the various asset enhancement, leasing and other efforts that have gone into the portfolio over the past 2 to 3 years. We will continue to work towards further strengthening the performance of the portfolio to deliver sustainable income growth.”

The portfolio committed occupancy rate continued to improve, reaching 95.2% as at 31 December 2019 from 95.0% as at the end of the previous quarter. The occupancy rates for the Singapore portfolio, the Australia portfolio and FBP as at 31 December 2019 were 95.5%⁶, 94.0%⁶ and 99.1%, respectively.

In respect of the UK where FBP is located, the Manager notes that the House of Commons had on 9 January 2020 approved the Withdrawal Agreement Bill which paves the way for the UK to leave the European Union (“EU”) on 31 January 2020, subject to the Bill also passing through the House of Lords. There are uncertainties in terms of future trade, labour, security and other arrangements between the UK and EU, which are to be negotiated during the post-Brexit transition period currently scheduled to end by end-2020. Notwithstanding the above developments, the Manager remains confident about the long-term prospects of the UK market. The Manager also expects the performance of FBP to remain stable given the property’s solid fundamentals, which include a high-quality tenant base, healthy occupancy rate of 99.1% and long WALE of 6.6 years⁷ (with 82.2% of leases by income expiring beyond FY23), as at 31 December 2019.

CAPITAL MANAGEMENT

FCOT’s gearing as at 31 December 2019 was 29.0%, which is one of the lowest among S-REITS currently. The healthy level of gearing, which is well below the regulatory limit of 45%, provides a high degree of financial flexibility to pursue growth initiatives and capitalise on market opportunities, as well as buffer against unforeseen market risks.

As at 31 December 2019, the weighted average term to maturity of FCOT’s borrowings was 1.8 years, with no more than S$210.0 million due in any one financial year. In addition, all borrowings are on unsecured basis, which affords further financial flexibility.

ASSET ENHANCEMENT INITIATIVES FOR LONG-TERM GROWTH

Enhancing and rejuvenating existing assets is an important part in the Manager’s overall strategy to reshape and strengthen the investment portfolio for long-term growth.

The completion of the upgrading and repositioning of Alexandra Technopark into a contemporary business campus in January 2019 has continued to bring about tangible positive outcomes and has enhanced the market positioning and long-term income potential of the property. Since January 2019, around 546,000 square feet (“sq ft”) of lease commitments have been secured at the property, including more than 480,000 sq ft of new leases. Signing rents have risen to S$4.40-4.60 per sq ft per month recently, some 10-15% higher than the average passing rent of the property as at the end of 2018. The committed occupancy rate too continued to increase to 97.2% as at 31 December 2019 from 96.8% as at the end of the previous quarter. The property now features a more diversified tenant profile with the addition of well-established local and international firms from a wide array of sectors.

At China Square Central, asset enhancement works to rejuvenate and reposition the retail podium at 18 Cross Street (the “Retail AEI”) obtained Temporary Occupation Permit in 4QFY19. As part of the revamp, the architectural and technical specifications of the retail podium have been upgraded while integration and connectivity with other parts of the development have been enhanced. In addition, the net lettable area of the retail podium has expanded by approximately 25% to around 80,000 sq ft, from around 64,000 sq ft prior to the commencement of the asset enhancement works. The green rating for China Square Central has also been upgraded to BCA Green Mark Award (Goldplus)⁸ since the completion of the Retail AEI.

The newly revamped retail podium recommenced business operation in phases from November 2019 and features a refreshed tenant mix focusing on food and beverage, health and wellness and lifestyle and services offerings. Currently more than 80% of the space in the retail podium has been committed, with the balance under active marketing.

At Central Park, enhancement works to the lobby and forecourt areas (the “CP AEI”) are in progress and are currently expected to complete in 3Q 2020. Estimated to cost S$23 million (FCOT’s 50% share: S$11.5 million), the CP AEI aims to improve the experience for tenants and visitors and consolidate Central Park’s position as one of Perth’s premium grade business locations. The CP AEI will result in a more contemporary, activated and community-friendly environment through the introduction of new amenities, flexible spaces and better connection with the adjacent park, among other things.

PROPOSED MERGER WITH FRASERS LOGISTICS & INDUSTRIAL TRUST (“FLT”)

On 2 December 2019, the Manager and the manager of FLT jointly announced the proposed merger of FCOT and FLT (the “Proposed Merger”). The Proposed Merger will be by way of a trust scheme of arrangement, with FLT acquiring all FCOT units held by FCOT unitholders in exchange for a combination of cash and new units in FLT. In conjunction with the Proposed Merger, FLT also announced the proposed acquisition of 50.0% interest in FBP from a wholly-owned subsidiary of Frasers Property Limited (the “Proposed Asset Acquisition”). The Proposed Merger and Proposed Asset Acquisition will be DPU accretive on a pro forma basis for FCOT unitholders.

The enlarged REIT will hold a diversified portfolio of logistics, industrial, office, business park and commercial assets worth approximately S$5.7 billion across Asia Pacific, Europe and the UK. The enlarged REIT will also have a broadened investment mandate to invest in a wide spectrum of asset classes across logistics, industrial, office, business park and commercial properties.

Mr. Jack Lam said, “This merger will be transformational for both REITs, allowing us to tap on each other’s strengths to create an even more resilient and diversified platform. With the combined portfolio, we will be able to unlock synergies and explore new opportunities in the logistics, industrial and commercial sectors. The transaction will be beneficial for FCOT Unitholders. In particular, they will benefit from a larger market capitalisation, FTSE EPRA/NAREIT Global Developed Index representation, a potentially wider investor base and higher trading liquidity.”

Subject to, among other things, approvals by FCOT and FLT unitholders and the Singapore Court, the Proposed Merger (including the delisting of FCOT) is currently expected to complete in end-March 2020/April 2020. Further information on the Proposed Merger can be found in the joint announcement, press release and investor presentation released on 2 December 2019.

¹ Including attributable net property income from 50.0% interest in Farnborough Business Park.

² Excluding contribution from 50.0% interest in Farnborough Business Park which is held as a joint venture and equity-accounted.

³ Refer to 1QFY20 Financial Statements for more details.

⁴ In view of the proposed merger with Frasers Logistics & Industrial Trust that was announced on 2 December 2019, the DRP has been suspended from and including the distribution for 1QFY20.

⁵ 18, 20 and 22 Cross Street was renamed as “Cross Street Exchange” from 1 January 2020.

⁶ Refers to committed occupancy.

⁷ Weighted average lease expiry by gross rental income. The weighted average lease to break, reflecting contractual rights for tenants to pre-terminate leases, if any, was 5.1 years.

⁸ The new rating was awarded on 2 January 2020. The previous rating was BCA Green Mark (Gold).