Frasers Centrepoint Trust Sells Yishun 10 Strata Lots to Sponsor’s Subsidiary in S\$34.5 Million Related Party Deal

Key Highlights of the Transaction

• Divestment of Ten Strata Lots at Yishun 10: Frasers Centrepoint Trust (FCT) has entered into a sale and purchase agreement to divest ten strata lots at 51 Yishun Central 1, Singapore, to Lion (Singapore) Pte. Limited, a wholly-owned subsidiary of its sponsor, Frasers Property Limited.
• Sale Price and Valuations: The transaction is valued at S\$34.5 million, based on independent valuations by Jones Lang LaSalle (S\$34.0 million) and Savills (S\$35.0 million). The agreed price is the average of the two, representing a “willing-buyer and willing-seller” basis.
• Portfolio Management Rationale: The manager believes this sale is part of proactive portfolio management, aiming to optimize FCT’s portfolio and returns for unitholders. Net proceeds of about S\$33.8 million will be used to repay debt, thus reducing leverage and strengthening the trust’s financial position.
• Nature of the Transaction: This is an “interested person transaction” (related party transaction), as the buyer is a subsidiary of the sponsor and a controlling unitholder of FCT. As per regulatory requirements, this must be immediately announced to the market.
• Regulatory Compliance: The deal is classified as a “non-discloseable transaction” under SGX rules, as it is small relative to FCT’s net asset value (0.8%) and net profits (0.2%). However, due to its nature as a related party transaction, it is disclosed to ensure transparency.
• Audit Committee Statement: The Audit, Risk and Compliance Committee confirms that the transaction was conducted on normal commercial terms and is not prejudicial to minority unitholders.
• No Change in Management or Directors: The transaction does not involve any changes to FCT’s board or management.

Details That Retail Investors Need to Know

• Who is Buying? The purchaser, Lion (Singapore) Pte. Limited, is directly owned by Frasers Property Limited, FCT’s sponsor, which already holds a 37.94% controlling stake in FCT. The manager is also a wholly-owned subsidiary of the sponsor.
• Impact on Financials: The sale proceeds will be mainly used to repay debt. This can help lower FCT’s aggregate leverage ratio, potentially improving its credit profile and financial flexibility.
• Size and Materiality: The transaction represents a small portion of FCT’s total NAV and NTA, and does not require unitholders’ approval as the aggregated value of interested party transactions for the year remains below the 5% regulatory threshold.
• Transparency and Governance: Despite being a related party deal, the transaction was valued independently and reviewed by the audit committee, with assurance that the terms are fair and at arm’s length.
• Strategic Implications: The divestment is part of FCT’s ongoing strategy to recycle capital from non-core or mature assets, potentially freeing up resources for acquisitions that may offer higher yields or better growth prospects.
• Market Sensitivity: The announcement may affect FCT’s share price due to its implications for portfolio composition, debt levels, and ongoing related party dealings. Investors should note that related party transactions can sometimes draw scrutiny and may impact perceptions of governance and alignment with minority unitholders.
• Documentation: Investors and analysts can inspect the sale and purchase agreement and valuation reports by appointment at the manager’s registered office for three months following the announcement.

Comprehensive Transaction Details

The ten strata lots being divested are part of a retail development adjacent to Northpoint City, with a gross floor area of 966 sqm and net lettable area of 961 sqm. These assets, acquired in 2016 with a 99-year leasehold from April 1990, are now sold at an average valuation, reflecting FCT’s ongoing review of its asset base. The manager expects to receive net proceeds of S\$33.8 million, after accounting for S\$0.2 million in expenses and S\$0.5 million in tenant security deposit transfers.

The transaction is not expected to significantly affect FCT’s balance sheet given its small size relative to the trust’s overall value, but it underscores FCT’s focus on disciplined capital management and portfolio rebalancing. The audit committee’s endorsement of the transaction’s terms should provide comfort to minority investors concerned about fairness in related party transactions.

As of the announcement date, FCT and its sponsor group have a total of S\$423.7 million in interested person transactions for the current financial year, well below the 5% threshold that would trigger a mandatory unitholder vote.

No director or substantial unitholder, other than as disclosed, has a direct or indirect interest in the transaction, and there are no changes to board appointments as part of this deal.

For further details, investors may contact the Head of Investor Relations at Frasers Centrepoint Asset Management Ltd.

What Should Shareholders Watch?

• Potential for further divestments or acquisitions as part of FCT’s ongoing portfolio management strategy.
• Impact on leverage ratios and future debt repayments.
• Governance and transparency regarding related party transactions, especially if the sponsor continues to be involved in future deals.
• Any changes in rental income or occupancy rates resulting from the sale of these retail assets.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should perform their own due diligence and consult professional advisers before making any investment decisions. The information herein is derived from public announcements and may be subject to change. The author and publisher accept no liability for any loss arising from reliance on this article.

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