The REIT Manager’s principal objectives are to deliver regular and stable distributions to Unitholders and to achieve long-term growth in distributions per Unit and in the net asset value per Unit, while maintaining a sustainable capital structure. The Manager has adopted a four-pronged strategy to guide the REIT’s future growth.
We will continue to source and pursue strategic asset acquisition opportunities of quality properties which provide attractive cash flows and yields that need FLCT's investment mandate. In doing so, we seek to generate stable and growing income streams which will enhance returns to Unitholders. It is our strategy to evaluate investment opportunities in global markets, with focus on FLCT's key markets, where we can leverage on existing on-the-ground management expertise. A measured approach will be taken when evaluating acquisitions which meet FLCT’s investment mandate.
Backed by a strong and established Sponsor, Frasers Property, FLCT is able to leverage on the Sponsor’s strong network and pipeline of quality assets, and also enjoys a Right of First Refusal (“ROFR”) arrangement from the Sponsor. Furthermore, FLCT has the potential to tap into growth opportunities from the Sponsor’s property development pipeline. We carefully assess opportunities that may arise under the ROFR for assets injection, typically when rental income generated by these properties has stabilised, among other factors.
We have the ability to selectively undertake development activities either jointly or on our own, including greenfield developments; Built-to-suit developments and subsequent acquisitions that are deemed complementary to the existing portfolio; and the re-development of existing assets.
In carrying out development activities, we will prudently consider the overall benefit to Unitholders and the requirements of prospective tenants. We seek to assess development and construction risks in the region. Additionally, in the development of existing or future properties, we also anticipate future sustainability needs and incorporate cost-saving, sustainability initiatives within the designs.
We proactively manage FLCT’s asset portfolio to enhance operational performance, allowing us to optimise the cash flow and value of our properties.
A disciplined and frequent review of asset strategies, involving monitoring market trends; development, occupier and investment dynamics; and a thorough analytics and valuation process, allows us to adjust strategies to take advantage of opportunities and maximise returns. Where appropriate, this may involve divesting and recycling non-core assets.
Our asset managers, when possible, deliver AEIs which are income and value accretive. Similarly, active tenant engagements underpin a significant component of our asset management operations. By leveraging our strong customer relationships and understanding our customers’ business operations, we are able to identify initiatives to better service our customers and provide solutions for greater efficiency and functionality of the properties. In doing so, we seek to achieve healthy tenant retention rates and reduce lease expiry concentration risks.
This allows FLCT to provide Unitholders with the security of income and access to organic growth from built-in rental increments, even though different stages of the economic cycle.
We seek to optimise FLCT’s capital structure and cost of capital by employing an appropriate mix of debt and equity to finance growth. While adopting appropriate gearing levels to ensure optimal returns to Unitholders, we will endeavour to maintain financial flexibility to pursue acquisitions or incur future capital expenditure. We conduct periodic assessment of our sources of capital and will tap the capital markets if required to fund acquisitions.
Given our global investment mandate, there is a need to proactively manage currency risk.
We have in place currency risk management strategies that include the use of same currency borrowings or if in a different currency, is swapped, as a partial hedge to fund our investments, serving as a natural currency hedge. In addition, we manage foreign exchange volatility on our distributable income with hedging instruments and target to hedge distributions on a rolling six-month basis.
Similarly, we apply interest rate hedging strategies to provide stable distributions to Unitholders. The policy is that at least 50% of FLCT's borrowings will be hedged to a fixed rate.