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Frasers Commercial Trust Long Term Play in Office Rental

Frasers Commercial Trust Logo

While most REITs are announcing their 4Q2016 or FY2016 financial results, Frasers Commercial Trust is actually announcing their 1Q2017 financial results.

Net Property Income fell by estimated 1% due to lower occupancy for China Square Central and Central Park. We understand that China Square Central has started the development of a 16 storey hotel and the construction works will definitely affect occupancy at China Square Central. The income disruption is supplemented by S$0.9 million capital distribution. Development work is expected to be completed by mid-2019.

There are certainly many construction works going on for Frasers Commercial Trust with hotel development works at China Square Central and Alexandra Technopark performing asset enhancement works soon.

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Summary of REITs Financial Results in 1Q2016

Most or all of the REITs in my portfolio have completed announcing their 1Q2016 results. There are some hits and some misses. As shown in the table I summarized below, Distribution Per Unit (“DPU”) increases for 6 out of 11 REITS I am holding while DPU fell for the other 5.

DPU fell for those REITs that focuses on a single industry sector such as industrial, retail or office. REITs like Suntec REIT which has a combination of office and retail survived the economy downturn. Mapletree Commercial Trust did fairly well too as it has a combination of office and retail (Vivocity).

Those with overseas assets did well too. Frasers Commercial Trust has both Singapore and Australian properties. Lippo Malls Indonesia Retail Trust did well as its malls are in Indonesia.

Having said so much, I just want to highlight the importance of diversification of portfolio.

Stock Name

Date Of Release

Of

Financial Results

Dividend Per Unit (DPU)

Increase or Fall

Frasers Commercial Trust Wednesday, 20 January 2016 DPU Increase
CapitaMall Trust Friday, 15 April 2016 DPU Increase
Keppel Reit Thursday, 14 April 2016 DPU Fall
Soilbuild Business Reit Thursday, 14 April 2016 DPU Fall
Suntec REIT Thursday, 21 April 2016  DPU Increase
Mapletree Commercial Trust Tuesday, 26th April 2016   DPU Increase
Parkway Life Reit Tuesday, 26th April 2016   DPU Fall
Far East Hospitality Trust Wednesday, 27th April 2016   DPU Increase
Cambridge Industrial Trust Thursday, 28th April 2016   DPU Fall
Lippo Malls Indonesia Retail Trust Tuesday, 3rd May 2016   DPU Increase
OUE Hospitality Trust Friday, 6th May 2016 DPU Fall

Frasers Commercial Trust DPU Rise for 2Q2016

Frasers Commercial Trust Logo

On 21st April 2016, Frasers Commercial Trust announce its 2Q2016 financial results. Distribution Per Unit (“DPU”) rises 2.9% to 2.45 cents as compared to 2.38 cents in the same quarter in 2015.

Higher Distribution Amount

The higher distribution amount was due higher rental rates and lower utilities expenses at Alexandra Technopark, contribution from 357 Collins street and lower repair and maintenance and painting expenses for Caroline Chisholm Centre.

2Q2016
(S$’000)
2Q2015
(S$’000)
YoY(%)
Gross Revenue 38,994 34,814 12
Net Property Income 28,836 24,716 16.7
Distributable Amount 19,348 16,189 19.5
Distribution Per Unit (“DPU”) (cents) 2.45 2.38 2.9

 Occupancy

Average occupancy stood at 92.6%.

Frasers Commercial Trust 2Q 2016 Occupancy

Weighted Average Lease Expiry

The Weighted Average Lease Expiry (“WALE”) stood at 3.3 years. There is low lease expiries for FY16. The well spread lease expiry provide income stability.

Frasers Commercial Trust 2Q 2016 Lease Expiry

Positive Rental Reversion

China Square Central achieved a positive rental reversion of 2.4%. 55 Market Street achieved a positive rental reversion of 5.4%. Alexandra Technopark achieved a positive rental reversion of 5.3%. What I like about Frasers Commercial Trust is that 52% of the leases have built in step up rents.

Top 10 Tenants

The leases of majority of top 10 tenants are expiring in 2017. Investors should monitor if the leases will be renewed.

Frasers Commercial Trust 2Q 2016 Top 10 Tenants

Debt

There is no financing required until FY17. 81% of gross borrowings are hedged on fixed rate.

Things to Note

Developments at China Square Central

Development works have started at China Square Central. The construction is expected to complete by 2019.

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