2 things come to mind when talking about Frasers Centrepoint Trust (SGX:J69U):

  • 9 out of 10 properties in its portfolio are retail malls (the other one is an office building);
  • All of the REITs properties are scattered across the different suburban locations in Singapore.

Yesterday evening (25 July 2023), the REIT have made available its business update for the third quarter of the financial year 2022/23 ended 30 June.

For the current quarter under review, it only made available updates about its portfolio occupancy and debt profile, both of which we will be taking a look at in this post:

Portfolio Occupancy (Q2 FY2022/23 vs. Q3 FY2022/23)

The following table is a comparison of the REIT’s portfolio occupancy recorded for the current quarter under review (i.e., Q3 FY2022/23 ended 30 June 2023) compared against that recorded in the previous quarter 3 months ago (i.e. Q2 FY2022/23 ended 31 March 2023):

Q2 FY2022/23Q3 FY2022/23
Portfolio Occupancy
(%)
99.2%98.7%
Portfolio WALE
(by NLA – years)
1.9 years2.0 years
Portfolio WALE
(by Gross Rent – years)
1.8 years1.9 years

My Observations: Compared to the previous quarter, Frasers Centrepoint Trust’s portfolio occupancy suffered a slight 0.5 percentage point (pp) dip, due to declines in occupancy rates the following properties: Causeway Point (down from 99.9% in Q2 FY2022/23 to 99.5% in Q3 FY2022/23), Century Square (down from 96.8% in Q2 FY2022/23 to 95.9% in Q3 FY2022/23), Changi City Point (down from 98.0% in Q2 FY2022/23 to 92.8% in Q3 FY20222/3 – this particular property suffered from the heaviest decline in occupancy rates, but according to the REIT’s business update, it is pending documentation of negotiated leases), and Hougang Mall (down from 100.0% in Q2 FY2022/23 to 99.1% in Q3 FY2022/23).

This is in addition to ongoing asset enhancement initiative works in Tampines 1, which is scheduled to be completed in the third quarter of FY2023/24. No occupancy rates were recorded for the current quarter under review.

Lease expiries were well-spread out over the next few years, with 4.4% (by total leased area) and 4.2% (by total gross rental income) expiring in the final quarter of FY2022/23, 31.1% (by total leased area) and 31.2% (by total gross rental income) expiring in FY2023/24, 24.8% (by total leased area) and 27.4% (by total gross rental income) expiring in FY2024/25, with the remaining 39.7% (by total leased area) and 37.2% (by total gross rental income) expiring in FY2025/26 or later.

Debt Profile (Q2 FY2022/23 vs. Q3 FY2022/23)

How I will be reviewing a REIT’s debt profile is the same as how I had reviewed its portfolio occupancy profile in the previous section – where I will be compating the statistics recorded for the current quarter under review (i.e., Q3 FY2022/23 ended 30 June 2023) against that recorded in the previous quarter 3 months ago (i.e., Q2 FY2022/23 ended 31 March 2023) to find out if it continues to remain healthy (which is especially important in the current high interest rate environment):

Q2 FY2022/23Q3 FY2022/23
Aggregate Leverage
(%)
39.6%40.2%
Interest Coverage
Ratio (times)
4.4x3.9x
Average Term to Debt
Maturity (years)
1.9 years2.5 years
Average Cost of
Debt (%)
3.6%3.7%
% of Borrowings Hedged
to Fixed Rates (%)
76%63%

My Observations: The REIT’s debt profile for the current quarter under review have also weakened compared to the previous quarter – with the most notable being its percentage of borrowings hedged to fixed rates falling to 63%. Coupled with 17.1% (or S$387.5m) of borrowings due for refinancing in the next financial year 2023/24, and another 22.8% (or S$517.0m) of borrowings due for refinancing in FY2024/25, its average cost of debt is poised to go up further, and higher borrowing costs impacting distribution payouts.

While aggregate leverage have also edged up slightly to 40.2%, but it is still a good distance away from the regulatory limit of 50.0%.

Closing Thoughts

While its portfolio occupancy have edged down slightly compared to the previous quarter, but it is still a very high level. Also, all of the REIT’s properties have an occupancy rate of at least 90.0%, which is very resilient.

The only concern I have is the 13 percentage point drop in the percentage of borrowings hedged to fixed rates (to a low of 63% in the current quarter under review) – suggesting its distribution payout to unitholders over the next couple of quarters could be impacted as a result of higher borrowing costs.

Finally, in case you are wondering, the REIT’s management did not declare any distribution payouts this time round, as distribution payouts are made on a semi-annual basis (i.e., in the second as well as in the fourth quarter).

With that, I have come to the end of my review of Frasers Centrepoint Trust’s business update. As always, do note that all the opinions above are purely mine, which I am sharing for educational purposes only. They do not imply and buy or sell calls for the REIT’s units. You are strongly encouraged to do your own due diligence before you make any investment decisions.

Related Documents

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

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