Frasers Centrepoint Trust (SGX:J69U), one of the largest suburban retail mall owners in Singapore (where its retail portfolio has approximately 2.3m square feet of net lettable area with over 1,400 leases), released its annual report for the financial year 2020/21 ended 30 September 2021 on Monday, along with a notice of its upcoming annual general meeting (AGM.)
As a unitholder of the retail REIT, I have studied its latest annual report and for the benefit of those who do not have the time to go through it, in this post, you’ll find a summary of the most important pointers to take note of, and also details about its AGM (which will be held on 18 January, and I will not be attending as I already have something scheduled on that day.)
Without further ado, let’s begin:
Key Financial Numbers:
- Gross revenue was up 107.5% on a year-on-year (y-o-y) basis to S$341.1m (FY2019/20: S$164.4m), while net property income skyrocketed 122.4% in the same time period to S$246.6m (FY2019/20: S$110.9m) largely due to contributions from properties (5 retail properties and 1 office property) in the AsiaRetail Fund Limited following the completion of the remaining 63.11% interest on 27 October 2020, as well as lower rental rebates assistance granted to tenants, offset by loss of contributions from 3 properties – Bedok Point, Anchorpoint, and YewTee Point, all of which were divested in the financial year under review.
- Along with improvements in its gross revenue and net property income, the REIT’s distributable income to unitholders also doubled to S$204.7m for the financial year under review (against S$101.1m reported in the previous financial year.)
- Distribution Per Unit also climbed 33.7% y-o-y to 12.085 cents/unit (FY2019/20: 9.042 cents/unit) mainly due to improved financial performance and enlarged portfolio post the REIT’s acquisition of AsiaRetail Fund Limited. In fact, the current financial year’s distribution was also higher than the 12.07 cents/unit declared by the REIT in FY2018/19 – which was before the Covid-19 pandemic.
- Gearing level also improved by 2.6 percentage points to 33.3% (FY2019/20: 35.9%), and this can be attributed to the repayment of bank loans with the proceeds from private placement, preferential offering, as well as proceeds from the 3 divested properties. The REIT’s gearing level as at the end of the financial year 2020/21 was lower than the average of 37.3% in the S-REITs industry. All-in cost of borrowing was also stable at 2.2% (FY2019/20: 2.4%.), and interest coverage ratio was at 5.1x (FY2019/20: 5.0x.)
Letter to Unitholders:
- Following the acquisition of AsiaRetail Fund Limited, along with the divestment of 3 retail properties (in-line with the REIT’s strategy of portfolio re-constitution), the REIT’s retail portfolio now consists of 9 suburban retail malls – all of them located next to or above MRT stations and/or bus interchanges, and serving a combined catchment population of 2.6m.
- Committed occupancy of the REIT’s retail portfolio as at 30 September 2021 was at 97.3% – with occupancy rates in Causeway Point, Northpoint City North Wing, Changi City Point, and Waterway Point increasing between 2 and 5 percentage points compared to last year – in-line with the pickup in leasing activities as Singapore continued to re-open (though many retailers remained cautious.)
- Tenant sales grew 10.6% y-o-y to S$2.08b, largely due to the low base effect in FY2019/20 (as sales were significantly impacted by the 2-month ‘circuit breaker’ period), with shopper traffic between 50% and 70% of the pre-Covid levels. Looking ahead, the further recovery of the tenants’ sales and shopper traffic will depend on how Covid-19 develops, along with the government’s response.
- In the financial year 2021/22 ahead, 36% of its leases (by gross rental income) will be up for renewal (with a quarter of the renewals under advanced negotiation or under documentation as at 30 September 2021.) The management’s view is that uncertainties in market conditions is likely to exert pressure on asking rents for new and renewal leases.
- To help tenants (whose businesses are impacted by the safe management measures in place), Frasers Property Retail and Frasers Centrepoint Trust have launched omnichannel retail platforms (in Frasers eStore, and the digital F&B app – the Makan Master), allowing tenants to tap into the near 900,000-strong membership base of the Frasers Experience loyalty programme to extend their digital outreach.
- On the sustainability front, the Board views it as a core of the REIT’s business strategy, with the management working closely with Frasers Property’s sustainability leadership and working teams to attain net-zero carbon, achieve Green Mark certification for their properties, and improve the health and well-being of their people and stakeholders.
- Currently, apart from Hougang Mall (where work is ongoing to have the mall attaining Green Mark certification in due course), the remaining malls in the REIT’s portfolio are BCA Green Mark certified Gold or above. Also, the proportion of Green Mark certified properties by gross floor area in the REIT’s portfolio is approximately 94%, exceeding one of their sustainability goals to green certify at least 80% of their owned or managed properties by 2024.
- Frasers Centrepoint Trust have also participated in the Global Real Estate Sustainability Benchmark (“GRERSB”) annual assessment (which assesses and benchmarks ESG performance of global funds, companies, and assets within the real estate sector) since 2019 – in the 2021 GRESB assessment, the REIT scored the highest rating of 5 stars, a significant improvement from the rating of 3 starts in the previous 2 years. Its total score has also improved from 69 points a year ago to 92 points this year.
- Looking ahead, the REIT will continue to explore and evaluate yield-accretive acquisition opportunities. Some potential opportunities include Northpoint City South Wing (which is owned by Frasers Property and the TCC Group), as well as third-party owners looking to sell their retail assets.
Top 10 Tenants by Gross Rental Income:
Collectively the REIT’s top 10 tenants (by gross rental income) contributed 19.5% towards the REIT’s total gross rental income as at 30 September 2021 (FY2019/20: 23.6%), with no one tenant contributing more than 3.3%.
The following is the REIT’s top 10 tenants, along with their percentage towards the total gross rental income contribution:
- NTUC (including NTUC FairPrice, NTUC FairPrice Finest, and Unity Pharmacy) – 3.3%
- Dairy Farm Group (including Cold Storage supermarkets, Guardian Pharmacy, and 7-Eleven) – 2.8%
- Kopitiam Group (including Kopitiam, Bags, Mei Shi Mei Ke, and Food Tempo) – 2.7%
- Breadtalk Group (including Food Republic, Breadtalk, Toast Box, The Foodmarket, and Din Tai Fung) – 2.3%
- Metro (Private) Limited (including Metro Department Store and Clinique Service Centre) – 1.7%
- Hanbaobao Private Ltd (operator McDonald’s Restaurants) – 1.6%
- Courts (Singapore) Pte. Ltd. – 1.4%
- Overseas-Chinese Banking Corporation Ltd – 1.3%
- Yum! (Operator of KFC and Pizza Hut outlets) – 1.3%
- United Overseas Bank Limited – 1.2%
Frasers Centrepoint Trust will be holdings its AGM on Tuesday, 18 January 2022 at 10.00am.
The meeting will be held online only, and unitholders can sign up to attend the meeting, along with submitting any questions you may have for the management here (do note that the deadline to do so will be on 15 January 2022 at 10.00am.)
As I’ve mentioned in the introductory paragraph, I will NOT be attending the meeting as I already have something scheduled on that day itself.
Disclaimer: At the time of writing, I am a unitholder of Frasers Centrepoint Trust.
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