Following the conclusion of the financial year on 30 September 2022 (i.e. FY2021/22), suburban retail mall REIT in Frasers Centrepoint Trust (SGX:J69U) held its annual general meeting (AGM) earlier this morning, which I attended as a unitholder to receive the latest developments.
Apart from attending the meeting proper, I also had the opportunity to meet up with some of the community members in InvestingNote in person, and engaging in some really meaningful discussions with some of them thereafter. Among them include the team from “The Joyful Investors“, where I really enjoyed the videos they have put up to share about the nuts and bolts of fundamental as well as technical analysis, and more importantly, their ability to explain them in such a newbie-friendly manner. It was a real privilege meeting up with them for some short discussions and a wefie together:
Also, many thanks to some of them who specially came up and say “hi” to me, along with all the compliments you’ve showered me on all the sharing here on “The Singaporean Investor”. It’s something I deeply appreciate from the bottom of my heart. Your support and encouragement really gave me the “fuel” to keep going.
In the rest of this post, you’ll read about my summary of the AGM (which I’ve compiled for the benefit of those who weren’t able to attend) – in particular, CEO Mr Richard Ng’s presentation, questions raised by fellow attendees and responses provided by the management, along with results of the 3 resolutions put to vote.
Presentation by CEO Mr Richard Ng
Emerging Bigger & Stronger from the Pandemic:
- From S$3.9bn of assets under management before the pandemic broke out in the year 2020, at the end of FY2021/22, the REIT has a total of S$6.2bn of assets under management – a growth by about 50%.
- Trading volume for the REIT have also shot up by more than 40% since 2019, and currently, it is one of the top 10 largest Singapore-listed REITs by market capitalisation.
- The REIT have also grown from 6 retail assets before the pandemic to 9 currently, with all of them located in populous residential areas and connected to, or within a short walking distance to MRT stations or bus interchanges, and serving a total catchment population of 2.6m – which Mr Ng said is close to half of Singapore’s population.
- Occupancy rate of 97.5% as at 30 September 2022 is higher than the market average of 94%, underpinned by healthy shopper traffic and tenants’ sale.
Key Performance Figures for FY2021/22:
- Gross revenue, net property income, as well as distribution per unit improved by 4.6%, 4.9%, and 1.2% respectively to S$356.9m (FY2020/21: S$341.1m), S$258.6m (FY2020/21: S$246.6m), and 12.227 cents/unit (FY2020/21: 12.085 cents/unit) – in particular, its distribution per unit for the current financial year under review is higher than that before the pandemic (which is 12.070 cents/unit in FY2018/19) – the improved performance can be attributed to full-year contribution from the properties in ARF’s portfolio, absence of rental rebates provided to tenants following the Singapore Government transiting to “living with Covid”, an 11.3% increase in tenants’ sales compared to last financial year (and more than 10% increase compared to FY2019/2020 – before the pandemic broke out), along with higher income from atrium leasing with the lifting of restrictions from April 2022 (however, Mr Ng shared that atrium leasing only picked up from Jun-July 2022.)
- Mr Ng shared that the REIT divested 3 non-core assets (Bedok Point, Anchorpoint, and YewTee Point) during the financial year to bring down the REIT’s gearing to 33.0% (from 33.3% in FY2020/21), with interest coverage at 5.19x, 71% of borrowings hedged to fixed rate, as well as an average cost of debt at 2.5%. He also highlighted that the REIT’s debt maturity was also well-spread out, with no more than one-third of its total borrowings expiring in any one year.
- Achieved 5-star rating for the 2nd consecutive year at the GRESB Real Estate Assessment 2022.
- Attained “A” rating in ESG rating by MSCI ESG Ratings.
- Raised the proportion of green loans to 32% as at 30 September 2022 (up from 18% as at 30 September 2021.)
- 99.6% of portfolio by gross floor area certified BCA Green Mark Gold or higher, including 55% certified Green Mark Platinum.
- Finally, the REIT remains committed to Singapore’s first brownfield Distributed District Cooling Network, on track to be operational by 2025.
Questions & Answers Segment
The following are some of the questions raised by fellow unitholders during the meeting, accompanied by responses provided by the CEO, Mr Richard Ng:
- On a question relating to the performance of assets of ARF’s portfolio (Century Square, White Sands, Tiong Bahru Plaza, Hougang Mall, and Centra Plaza), Mr Ng said the properties’ performances (financial as well as operational metrics) were in-line with expectations.
- Responding to a question on “underperforming” properties, Mr Ng shared that Changi City Point was adversely affected during the pandemic with Singapore Expo shut. However, he shared that with events at the venue once again resuming, the performance of the property have also improved. He also shared that Century Square’s performance was adversely affected due to the cinema operator vacating the premises, and that the REIT is still looking for another operator to fill the vacated space.
- There were concerns raised on the extent to which the proliferation on online shopping have on tenant sales. Mr Ng shared that tenant sales have continued to do well, with growth exceeding 10% on average. Moving forward, the REIT will continue its efforts to encourage its tenants to go omnichannel (having an online presence on its Frasers Experience App, on top of its physical presence in the malls – he cited how F&B merchants have seen their sales improve through “click and collect” and delivery from the app, and also how online retailer in Love Bonito now have a presence in brick-and-mortar malls.) He added that the REIT will constantly toggle tenant mix in the malls to meet changing demands by the community.
- With the current rising interest rate environment, a unitholder wanted to know its impact on distributions. Mr Ng said the management is constantly exploring hedging, secured/unsecured loans, tenure of borrowings, etc. to best manage the situation (and minimise its impact on distributions.) On top of that, he shared the REIT is also looking at opportunities to generate more income to support the distribution growth, including income from atrium events, space optimisation in its malls, rental reversions from new and renewed leases, along with incorporating step-up rentals in lease agreements.
- One unitholder highlighted the REIT have 2 malls located in close proximity in the Tampines precinct – Century Square (acquired from ARF’s portfolio), and Tampines 1, and was concerned by one mall “taking business away” from another. To this, Mr Ng reassured the unitholder that there are enough population numbers in Tampines Town to support the businesses in the 2 malls. He cited that apart from the residents, there are also institutions and banks in the vicinity, and the malls are getting footfall coming from the staffs working there in the day. Additionally, Mr Ng also shared the different tenant mix in both malls – one example being the presence of a cinema in one mall (Century Square – even though they are still looking for an operator currently), but not in the other.
- Another unitholder was concerned by the weakness in performance in Central Plaza, an office building (a property in ARF’s portfolio incorporated in Frasers Centrepoint Trust’s portfolio following the acquisition), highlighted the fact it does not fit into the REIT’s portfolio (where all of its properties are retail malls), and whether the management have plans to divest the property. In response, Mr Ng said the weakness in performance in Central Plaza was due to the exit of one anchor tenant, but it has since been replaced (that said, the property’s performance will improve in the coming quarters.) Also, he shared that the office building has a complimentary effect on Tiong Bahru Plaza, which is located right next to it, and during the day, the mall sees footfall coming in from people working there. Moving ahead, while the REIT’s management is not looking at divesting the property at the moment (but instead will look at how to further optimise it), but they are not ruling it out in the future when the valuation improves (and divesting it then will provide better returns for unitholders.)
- A unitholder voiced concerns about the effect of dilution as a result of the REIT not taking part in Hektar REIT’s private placement (announced in November 2021), along with its weakness in performance negatively impacting the REIT. To this, Mr Ng said the dilution effect was minimal, which was the reason why the REIT did not participate in the private placement. As to Hektar REIT’s weakness in performance dragging down Frasers Centrepoint Trust’s performance, Mr Ng reassured the unitholder the investment comprises just a small portion of the entire portfolio, and hence any negative impacts is minimal.
- In response to a question asking about particular segments that have improved, as well as those that are still lagging behind, following Singapore’s emergence from the pandemic, Mr Ng said different segments have varying performances at different junctures – for instance, supermarkets did very well during the pandemic, but its performance have come down due to the high base last year, with fashion retailers’ performance seeing improvements as safe management measures were gradually lifted.
- Finally, on a question relating to AEI plans the REIT may have in place for its properties, Mr Ng said that the REIT is looking to do something big in one of its malls, but was unable to provide more details as plans are still under discussions. He said the REIT will provide an update at an appropriate time.
Results of 3 Resolutions Put to Vote during the Meeting
- Resolution 1, which is to receive, and adopt the Trustee’s Report, the Statement by the Manager, the Audited Financial Statements of FCT for the financial year ended 30 September 2022 and the Auditor’s Report thereon, was passed with 99.97% of the votes for, and 0.03% of the votes against.
- Resolution 2, which is to re-appoint KPMG LLP as Auditors of FCT to hold office until the conclusion of the next Annual General Meeting, and to authorise the Manager to fix their renumeration, was passed with 98.78% of the votes for, and 1.22% of the votes against.
- Resolution 3, which is to authorise the Manager to issue Units and to make or grant convertible instruments, was passed with 98.09% of the votes for, and 1.91% of the votes against.
In my opinion, the REIT is a stable one – and with most of the malls’ tenants retailing necessities (supermarkets, F&B, pharmacies, etc.) they will continue to remain resilient regardless of the economic situation – as people still need to buy groceries, settle their meals in foodcourts, and get medications as and when they need them.
Also, with hybrid working arrangements set to stay, and as a result more people working from home on some days of the week, suburban retail malls like those in Frasers Centrepoint Trust’s portfolio will benefit from footfall coming in from these groups of people.
Moving forward, with the current high interest rate environment, I do not foresee much acquisition activities. Rather, I am looking at any AEIs that the REIT may be embarking to further improve revenue contribution.
With that, I have come to the end of my summary of Frasers Centrepoint Trust’s AGM earlier this morning. As always, I hope you’ve found the contents presented within useful, and here’s wishing all of you a wonderful Tuesday evening ahead!
Disclaimer: At the time of writing, I am a unitholder of Frasers Centrepoint Trust