The director of Frasers Centrepoint Trust (FCT) has announced that it is planning to sell Changi City Point to a buyer who will pay $338 million cash. The consideration was negotiated on a willing-buyer-willing-seller basis after taking into account the property’s independent valuation of $325.0 million as at July 31.
The trustee of the REIT, HSBC Institutional Trust Services (Singapore) has entered into a purchase and sale contract with the prospective buyer who is an investor from China. Chinese investment firm, on August 30. The transaction was handled through Cushman & Wakefield.
The divestment will be completed by November 15. When it is completed the REIT will be expected to generate about $329.7 million in profits after taking into account the fee associated with divestment, divestment related costs and the transfer tenants security deposits.
Hillock Green architect has successfully procured a residential site at Lentor Central.
As per the REIT manager, the company plans to make use of the net profits to pay off its loans by imposing more interest and lower FCT’s aggregate leverage pro forma at the end of June between 40.2% to 37.1%.
“This divestment forms part of the strategic review of our portfolio that aims to increase the resilience of FCT’s portfolio. It is in the spirit of our long-term goal to generate value for the unitholders of FCT. The estimated capital gain and net gain will be around $10.9 million and $20 million, respectively,” says Richard Ng the CEO of the manager.
As well as reducing FCT’s leverage in aggregate, Ng notes that the move will also decrease the cost of borrowing for its customers during the nine-month period that ending June 30. The divestment is also believed to boost the REIT’s hedge ratio of fixed rate loans, from 64% to 73% and each on an annual basis.
The divestment’s impact on the portfolio is expected to improve FCT’s commitment occupancy rate, its average gross profit per square foot and the REIT’s renters’ selling per square foot, and the average lease term remaining for the portfolio of retail properties.
“These make FCT in a better position to concentrate on our main suburban retail strategy moving forward,” he continues.
Changi City Point is a mall for retail located on the 5th floor of Changi Business Park Central 1. The building is comprised of three floors and a basement level. It it is linked to the Expo MRT station located on the East West and Downtown Lines. It is an area of net lettable (NLA) that is 19,366 square meters (208,453 sq feet).
After the divestment is completed the retail portfolio of FCT will consist of nine retail properties that are all situated in the suburbs of Singapore. The commercial property portfolio will cover an overall Net Lettable Area of around 2.7 million sq ft, with a an emphasis on the most important services and trades.