Retail REIT Frasers Centrepoint Trust (SGX:J69U) released its annual report for the financial year ended 30 September 2020, along with its notice of annual general meeting (AGM) this morning before market hours.

As a unitholder of the REIT, I have studied the report to learn about the latest updates, and in today’s post (which is also my final post this year), you will find a summary of the most important points to take note of (which I have compiled for the benefit of those who do not have the time to go through the report):

Key Highlight of FY2019/20: The Acquisition of AsiaRetail Fund Limited

  • The key highlight for the retail REIT for the financial year under review was its acquisition of the remaining interest in AsiaRetail Fund Limited on 27 October 2020. With that, Frasers Centrepoint Trust is now one of the largest suburban mall owners in Singapore with total assets amounting to approximately S$6.7 billion.
  • The REIT’s Singapore portfolio, post-acquisition, comprises of a total of 11 retail properties: Causeway Point, Northpoint City North Wing (including Yishun 10 Retail Podium), Anchorpoint (in an announcement on 24 December 2020, it was reported that the mall will be divested to unrelated third-parties for S$110m. You can read the article in The Business Times in full here), YewTee Point, Changi City Point, Waterway Point (the REIT has a 40.0% stake in), Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square, as well as Tampines One.
  • Also, post-acquisition, the retail REIT has 2.3 million square feet of net lettable space, with more than 1,500 retail leases.

Letter to Unitholders (by Chairman Cheong Choong Kong, and Chief Executive Officer Richard Ng)

  • The retail sector was severely impacted by the ongoing Covid-19 pandemic, particularly from the two-month Circuit Breaker period, which saw only 30% to 40% of the tenants staying open (as only businesses in essential trades were allowed to continue their operations; F&B outlets were only allowed to do takeaways and delivery orders.)
  • The REIT, along with its sponsor Frasers Property Limited (SGX:TQ5), rolled out support packages to help the affected tenants cope with operation and cashflow challenges.
  • In terms of the REIT’s financial performance in FY2019/20 (compared to the previous financial year under review), it was severely impacted as a result of rental rebates (amounting to S$27.4m) granted to its tenants in the second half of the financial year – as such, the REIT’s revenue saw a 16.3% year-on-year (y-o-y) decline to S$164.4m (FY2018/19: S$196.4m); with that, its distribution to unitholders also fell by 15.5% y-o-y to S$101.1m (FY2018/19: S$119.7m.)
  • The REIT’s financial position as at the end of the financial year on 30 September 2020 remained healthy, with its gearing level at 35.9% (where total borrowings is at S$1,255 million), and its average cost of borrowings at 2.4%.
  • While the REIT’s overall portfolio occupancy rate declined slightly to 94.9% (FY2018/19: 96.5%), but since the start of Phase 2 on 19 June 2020, all retailers have resumed operations with the exception of those operating family karaokes and travel agencies (which is about less than 1% of the REIT’s total lettable area.) Portfolio shopper traffic have also remained steady at 60% to 70% of pre-Covid level. In the coming financial year (i.e. FY2020/21), about 26% of the leases will be expiring.
  • In the financial year ahead, the management is of the view that due to continuing market uncertainties, an uneven pace of recovery for the retail sector, continuation of certain Covid-19 control measures, and a weak economic outlook, the REIT expects pressure on asking rents for news and renewal leases.
  • With that in mind, the REIT will be adopting a differentiated approach in their lease negotiations, which includes offering a concessionary rent rate for a specific period before returning back to market rate in the subsequent period, or offering short-term lease extensions to allow tenants more time to assess their situation before committing to a new lease.
  • Moving ahead, the REIT’s management will continue to explore evaluate acquisition opportunities that are yield-accretive – some of the potential opportunities include Northpoint City South Wing, along with opportunities from third-party owners looking to divest their retail assets.

Frasers Centrepoint Trust’s Portfolio Analysis

  • Portfolio occupancy: With the exception of YewTee Point (whose portfolio occupancy was the same as the previous financial year), and AnchorPoint (whose portfolio occupancy improved by 13.7 percentage points to 92.7% as at 30 September 2020), the rest of the retail malls in the REIT’s portfolio saw their occupancy decline on a y-o-y basis (this excludes malls in AsiaRetail Fund Limited’s portfolio.)
  • Top 10 tenants by gross rental income: The REIT’s top 10 tenants collective accounting for 23.6% towards its total gross rental income (in the previous year, it was 21.1%.) Apart from NTUC and Dairy Farm Group (the former contributed 3.6% towards the REIT’s total gross rental income, while the latter contributed 3.2%), no single tenant contributed more than 3.0% towards the REIT’s total gross rental income.

Notice of AGM

The REITY will be holding its virtual AGM on Thursday, 21 January 2021, at 10.00am. If you are a unitholder of the REIT, and would like to attend the meeting, you can register via the link here (deadline to do so will be on 18 January 2021, at 10.00am.)

I will be attending the meeting as a unitholder and will be compiling a summary for the benefit of fellow unitholders who are unable to attend in due course.

In Conclusion: My Personal Thoughts

With Singapore having just transitioned into Phase 3 of the safe reopening (on Monday, 28 December 2020), one of the industries that will benefit from this will be retail.

My personal opinion is that, barring a second wave of outbreak in Singapore, footfall to the retail malls should gradually return to pre-Covid levels in the months to come – especially now that leisure travelling is not allowed (with that, Singaporeans will spend more time in the retail malls, hence benefiting retail REITs), as well as the upcoming Lunar New Year (where Singaporeans will head to malls to prepare for the festive season.)

Finally, with regard to the withholding of distribution to unitholders, I am of the opinion that the management may opt to continue to retain a certain amount in case of any unforeseen circumstances (even though the amount retained should be a smaller amount compared to the current financial year under review.)

With that, I have come to the end of this post. I’d like to take this opportunity to wish you and your family a very happy and prosperous 2021 year of the bull ahead!

Related Documents

Disclaimer: At the time of writing, I am a unitholder of Frasers Centrepoint Trust.

Launch Event for My First Book: building your REIT-irement portfolio

building your REIT-irement portfolio by Lim Jun Yuan - Official Book Launch on 26 September 2023

After months of hard work, my first book, 'Building Your REIT-irement portfolio' is finally ready! In this easy-to-follow 178-page guide, you'll learn everything you need to know about building a REIT portfolio that can provide for you in your retirement years. You can check out a preview of the book here.

I'm extremely thankful to the team at InvestingNote and ShareInvestor for their help to organise a book launch event for me on Tuesday, 26th September 2023, from 6:00pm to 8:00pm at their office in New Tech Park.

For more details and to RSVP (seats are extremely limited), click on the link below:

Click here for more details on the book launch event and RSVP here...