Frasers Centrepoint Trust announces SGD NC5 perpetual bonds at an IPG of 4.25%

Frasers Centrepoint Trust (“FCT”) plans to issue new subordinated NC5 perpetual bonds (non-call in the first 5 years) at an initial price guidance (“IPG”) of 4.25%. The new notes are expected to be issued on 2 July 2025. The first reset date for this issue will be on 2 July 2030 and each date falling every five years thereafter. This new issuance is made available only for accredited and institutional investors.

The real estate investment trust (REIT) indicated that the net proceeds will be used for new investments, distributions, financing any asset enhancement works, refinancing any existing borrowings of the Group, on-lending to any trust, fund, limited liability partnership or entity in which FCT has a direct or indirect interest and/or to finance the Group’s general corporate activities, working capital purposes and/or day-to-day ordinary course of business activities.

FCT is a pure-play Singapore suburban retail REIT and is also the nation’s largest prime suburban retail space owner, with its assets under management amounting to SGD 7.1 billion as of 31 March 2025.

For the first half of the financial year ended 31 March 2025 (“1HFY25”), gross revenue rose 7.1% YoY to SGD 184.4 million, while its property expenses also rose 6.5% YoY to SGD 50.7 million. This led to a 7.3% YoY rise in its net property income (NPI), a 12.7% YoY increase in net income and a 13.8% YoY gain in total return before tax.

The stronger financial performance was driven by broad-based improved performance across the portfolio properties. Shopper traffic was up 1.0% YoY, which supported the 3.3% YoY growth in tenants’ sales. The REIT also maintains a high and stable committed occupancy of 99.5% for its retail portfolio. With healthy occupancy rates and footfall, these also translated to healthier rental reversions of 9.0% in 1HFY25 (1HFY24: 7.5%) (Table 1).

Table 1: Rental Reversions of its retail portfolio in 1HFY25

Overall, the REIT reported higher operating results YoY. We think that its retail portfolio will remain stable, anchoring portfolio performance. Their assets (suburban/heartland malls) are located in residential towns and serve the daily needs of residents, offering a mix of retail, supermarkets, family-friendly entertainment and dining options. These malls, thus, generally differ from downtown malls in terms of offerings as they are more related to essentials, relative to downtown malls, which consist of luxury brands and premium dining options.

As such, the bulk of FCT’s tenants cater to essential, non-cyclical demand. This positions FCT well in the face of broader macroeconomic challenges, which are more likely to dampen discretionary spending and impact downtown malls reliant on tourism and high-end consumption.

Looking at its borrowings, the REIT’s total borrowings amounted to SGD 2,057.4 million as of 31 March 2025, with undrawn revolving credit facilities amounting to SGD 596.6 million and a cash position of SGD 32.6 million (FY24: SGD 26.8 million). This suggests that they are well-covered for all their maturing debt till the end of FY26.

In terms of secured borrowings (15.9% of total borrowings), the collaterals are Century Square and White Sands. Hence, with most of their properties not being collateralised, we think FCT could tap into more secured loans if required. We also recognise that its operational performance remains healthy and resilient and could help grow its cash position, hence further supporting its credit profile.

As at 31 March 2025, the REIT’s aggregate leverage was 38.6% (FY24: 38.5%), below S-REITs' average gearing of 39.6%. The REIT’s interest coverage ratio (ICR) for the trailing twelve-month period ended 31 March 2025 was 3.28 times (FY24: 3.41 times). Both of which are healthy against the MAS regulatory requirements of (i) maximum leverage of 50% and (ii) minimum ICR of 1.5 times.

Table 2: Comparing FCT’s new issue with SGD REIT peers

Overall, we think FCT’s credit profile remains healthy amongst SGD REITs in terms of leverage and debt ratios. However, the broader macro backdrop presents inflationary pressures and could keep rates higher for longer. Investors should be mindful that leveraged sectors such as S-REITs could face refinancing risks in the near term, though we do not think it is a huge risk for FCT.

In terms of attractiveness of this issuance, the initial price guidance (IPG) of 4.25% appears fair when compared to other issuances by ARTSP (portfolio of serviced apartments and hospitality assets) with similar years to call, considering the likelihood that the final price guidance would adjust downwards (Table 2). However, when compared to GUOLSP 4.350% Perpetual Corp (SGD), it would appear fairly attractive. Finally, when compared to SUNSP 4.480% Perpetual Corp (SGD), we wish to highlight that the higher yield is not surprising as Suntec REIT comes with a relatively much leveraged profile relative to FCT.

Related article: Suntec REIT announces SGD NC5 perpetual bonds at an IPG of 4.80%

Related article: GuocoLand announces new SGD NC5 perpetuals at an IPG of 4.65%

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

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