Frasers Centrepoint Trust (SGX:J69U) is a pure-play Singapore-focused REIT with all of its 9 suburban retail malls and 1 office property (in its portfolio) located in the country.

After market hours yesterday (26 July) evening, the REIT released its business update for the third quarter of the financial year ended 30 June 2022 (for information, the REIT has a financial year ending every 30 September.) As the REIT have already shifted to reporting its full financial statements on a half-yearly basis, for the current quarter under review, it only made available its portfolio as well as its debt profile, both of which we will be taking a look at in this post:

Portfolio Occupancy (Q2 FY2021/22 vs. Q3 FY2021/22)

When I review a REIT’s portfolio occupancy rate, I will always take the statistics reported for the current quarter under review (in this case, it is for the third quarter of FY2021/22 ended 30 June) compared against that reported in the previous quarter 3 months ago (in this case, it will be for the second quarter of FY2021/22 ended 31 March) to find out whether or not it has continued to remain resilient.

You can find the statistics in the table below:

Q2 FY2021/22Q3 FY2021/22
Portfolio Occupancy
(%)
97.8%97.1%

My Observations: The slight 0.7 percentage point (pp) decline in its portfolio occupancy rate compared to last quarter was due to declines in occupancy rates in the following properties:

  • Tampines 1 (down from 98.8% in Q2 FY2021/22 to 97.8% in Q3 FY2021/22)
  • Tiong Bahru Plaza (down from 98.6% in Q2 FY2021/22 to 98.2% in Q3 FY2021/22)
  • Century Square (down from 93.4% in Q2 FY2021/22 to 83.0% in Q3 FY2021/22)
  • Hougang Mall (down from 100.0% in Q2 FY2021/22 to 99.4% in Q3 FY2021/22)
  • Central Plaza (Office) (down from 77.3% in Q2 FY2021/22 to 77.0% in Q3 FY2021/22)

Despite of that, I note that, apart from Century Square (where its occupancy rate fell by 10.4pp to 83.0%, due to pre-termination by an anchor tenant; however, I also understand that advanced negotiations are ongoing with replacement tenants for this space), the occupancy rates for all the other properties still remain at above 90.0% – so I’m not too worried about it.

As far as lease expiries are concerned, they are well-spread out over the next couple of years – for the remaining quarter of FY2021/22, only 5.3% of the leases (by gross rental income) will be expiring, with another 30.1% of the leases expiring in FY2022/23, 34.4% of the leases expiring in FY2023/24, and the remaining 30.2% of the leases expiring only in FY2024/25 and beyond.

Debt Profile (Q2 FY2021/22 vs. Q3 FY2021/22)

Just like how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will also be reviewing its debt profile by taking the statistics reported for the current quarter under review and compare them against that reported in the previous quarter 3 months ago, as follows:

Q2 FY2021/22Q3 FY2021/22
Aggregate Leverage
(%)
33.3%33.9%
Interest Coverage
Ratio (times)
5.7x5.2x
Average Term to Debt
Maturity (years)
2.1 years2.3 years
Average Cost of
Debt (%)
2.2%2.4%

My Observations: Compared against the previous quarter (i.e. Q2 FY2021/22), the REIT’s debt profile have also declined slightly – again, I’m not too concerned because the aggregate leverage, at 33.9%, is still a good distance away from the regulatory limit of 50.0%.

Also, as far as its interest coverage ratio is concerned, anything above 5.0x is considered ideal (for me) – that said, even though this statistic fell slightly compared to last quarter, I’m not too concerned as well.

In terms of its debt maturity, its also pretty well-spread out over the next couple of years – there are no more borrowings due for refinancing in the final quarter of the current financial year 2021/22. In the next financial year 2022/23, 21.0% (or S$391m) of its borrowings will be maturing, with another 25.8% (or S$479m) of its borrowings will be maturing in FY2023/24, 27.9% (or S$519m) of its borrowings maturing in FY2024/25, and the remaining 25.3% (or S$469m) of its borrowings maturing only in FY2025/26 and beyond.

Finally, 69% of its borrowings are hedged at fixed interest rates, which provides a reasonable amount of “protection” against potential risks arising from interest rate hikes.

Closing Thoughts

While both its portfolio occupancy and debt profile weakened compared to the previous quarter 3 months ago, but just like I’ve mentioned in the respective sections above, I’m not too overly concerned, as the occupancy rate for the individual properties still remain at above 90.0% (apart from Century Square, which I foresee the vacant space being filled by the time the REIT releases its results next quarter, if not by the end of the calendar year 2022.) Also, its debt profile continues to remain healthy (its aggregate leverage, at 33.9% as at 30 June 2022m still has ample debt headroom for the REIT to embark on further yield-accretive acquisitions as and when an opportunity to do so arises.)

Finally, for those who are not already aware, as the REIT have also switched to declaring a distribution to its unitholders on a half-yearly basis. As such, there are no distributions declared for the current quarter under review.

With that, I have come to the end of my review on Frasers Centrepoint Trust’s 3rd quarter business update. As always, I hope you’ve found the contents above useful, and at the same time, note that everything you’ve just read above is purely for educational purposes only. They do not represent any buy or sell calls for the REIT’s units. You’re strongly encouraged to do your own due diligence prior to making any investment decisions.

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

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