Frasers Centrepoint Trust (FCT) Preferential Offering: What should unitholders do?

Frasers Centrepoint Trust to acquire Northpoint City South Wing

Frasers Centrepoint Trust (FCT) is acquiring Northpoint City South Wing from its sponsor Frasers Property Limited (FPL), for a total acquisition cost of approximately S$1.17 billion. 

The manager intends to fund the acquisition via proceeds from an equity fundraising (EFR) comprising a private placement to raise around S$200 million and a preferential offer to raise another S$200 million, debt financing, and the issuance of perpetual securities to raise an additional S$200 million.

About Northpoint City South Wing

Northpoint City South Wing (NPCSW) is located in Yishun and has a net lettable area (NLA) of 301,579 square feet with a two-storey retail complex and two basement levels. NCSW enjoys a committed occupancy of 100% and is the largest prime suburban mall in the north region of Singapore. 

The property is also seamlessly integrated with the Yishun Transport Hub which includes Yishun Mass Rapid Transit (MRT) station and bus interchange, via an underground pedestrian link and Nee Soon Central Community Club. These connections make the property easily accessible to the public.

NPCSW also boasts the highest shopper traffic within FCT’s retail portfolio which grew at a compound annual growth rate (CAGR) of 9.6% over 2020 to 2024. 

Impressively, NPI for NPCSW grew at 8% CAGR between FY2020 to FY2024. The mall also has a high-quality tenant base that includes NTUC Fairprice, Harvey Norman, and Uniqlo.

Rationale for the acquisition of Northpoint CIty South Wing

The manager justified this acquisition by stating several key benefits.

#1 - Strong performance with a dense and growing catchment

NPC is an attractive asset with a quality tenant base across its North and South Wings. NPI for NPCSW grew at an 8% CAGR from FY2020 to FY2024, going from S$128 million to S$174 million. 

The healthy trading performance of its major tenants, along with its strategic location, helped the mall to achieve this feat. 

Tenant sales also did well, growing at an 8.8% CAGR from calendar year 2020 to 2024, outperforming comparable malls such as Causeway Point and Waterway Point. 

Using 2019 as a starting index, tenant sales grew by a third by 2024, compared to slightly more than one-fifth for comparable malls.

In addition, NPC’s catchment area has a population density that is around 2x the national average, implying that there is a large pool of potential shoppers for the mall. 

Being the largest integrated development in the north, NPC serves as a lifestyle, recreation, and transportation hub that attracts high levels of footfall.

#2 - Strengthens FCT’s market position

This acquisition also strengthens FCT’s position further as a prime suburban mall owner. Post-acquisition, the REIT will own a 10.3% market share of private shopping centres by NLA, making it the largest single owner of suburban retail, beating CapitaLand Integrated Commercial Trust which has an 8.6% market share. 

Moreover, the acquisition will also boost FCT’s essentials trade mix, bumping it up from the present 52.9% to 53.4%, making the REIT more resilient to downturns. 

NPC will also contribute nearly 27% of the REIT’s NPI post-acquisition, up from the current 14.4%, making the mall the single largest NPI contributor after Causeway Point’s 20.1%.

#3 - Northpoint City under a single owner

With this acquisition, FCT is now the owner of both the North and South Wings of NPC. 

This single ownership will allow the REIT to execute comprehensive asset enhancement initiatives (AEIs) to optimise retail performance, thereby unlocking value for unitholders. 

The diagram below shows the potential strategies that can be utilised.

By executing value-added initiatives, FCT could potentially add up to 8,000 square feet of additional retail NLA, resulting in higher rental income for NPC. 

The re-mixing of tenancies should result in higher potential rental yields and an increase in shopper traffic. 

Finally, the consolidation of M&E (mechanical and electrical) systems across both wings should lead to operating efficiencies and lower operating expenses. 

As a result, NPC’s NPI margin could increase further from the current 72.7% to 74.2%.

#4 - Transaction expected to be DPU-accretive

Based on the S$400 million EFR and the proposed issuance of S$200 million of perpetual securities, the accretion to DPU is expected to be 2.0% based on FY2024’s DPU of S$0.12042. 

However, if the perpetual securities are not issued, then the DPU accretion is expected to be 1.6%.

Despite the EFR, the manager expects FCT’s pro-forma aggregate leverage to rise from 38.5% to 39.8%. If the perpetual securities are not issued, this gearing level could potentially rise to 42.2%.

Equity fundraising announced

As mentioned, FCT announced an EFR exercise to partially raise funds for the NPCSW acquisition. 

On 25 March 2025, this EFR was launched comprising a private placement which aims to raise around S$200 million along with a preferential offer that will also raise around S$200 million. 

There could also be a potential issuance of perpetual securities to raise no more than S$200 million, with the remainder of the acquisition outlay being funded by debt financing. 

The final funding structure for the total acquisition cost will be announced by the manager at a later time after accounting for prevailing market conditions and FCT’s aggregate leverage.

Private placement – already completed and units were listed on 4 April, 9 a.m.

The private placement was completed on 4 April with a total of 105,264,000 new units issued at an issue price of S$2.09 per unit. 

With this issuance, the total number of FCT units in issue will rise to 1,923,517,220. The private placement will result in a 5.8% dilution. These units are already listed and trading began for the new units on 4 April at 9 a.m.

Preferential offering – last date and time of acceptance on 16 April, 5:30 p.m.

As for the preferential offering, FCT’s units have already gone ex-entitlement for this offer, and entitled unitholders are given the right to buy 54 preferential units at S$2.05 each for every existing 1,000 units held. 

The opening date and time for this preferential offer is 8 April 2025 at 9 a.m., and the last date and time to accept the offer is 16 April 2025 at 5:30 p.m. 

Payment of cumulative distribution

FCT will pay out a cumulative distribution for the period from 1 October 2024 to 3 April 2025. 

The next distribution will be from 4 April 2025 till the end of fiscal 2025 (30 September 2025). Half-yearly distributions will resume thereafter. 

The manager estimates that the cumulative distribution should be between S$0.0613 to S$0.0617. This distribution will be determined at a later date and paid out on 30 May 2025.

FCT’s current share price is close to preferential offering price

The acquisition will consolidate Northpoint City Mall under a single owner, allowing FCT to undertake more extensive and comprehensive asset enhancement initiatives to unlock value through tenant mix strategies and operating efficiencies.

The acquisition is expected to be 2.0% accretive to FCT’s fiscal 2024 (FY2024) DPU, assuming the issuance of S$200 million of perpetual securities.

Following the completion of the acquisition and EFR, FCT’s aggregate leverage is expected to rise to 39.8% from the current 38.5%. If the perpetual securities are not issued, this gearing level could potentially rise to 42.2%.

With the volatility in global markets, FCT’s share price of S$2.08 as of 9 April 2025 is just slightly above the preferential offering price of S$2.05. 

Should the share price fall below the preferential offering price of S$2.05, investors will be able to purchase units of FCT directly in the market at a lower price. 

FCT currently trades at a historical distribution yield of 5.8% and 0.91x its book value of S$2.29 as of 30 September 2024.

If you are interested to learn more about the outlook of Singapore REITs amidst the current market volatility, join us for our upcoming free webinar on 16 April, where we will discuss if the share prices of Singapore REITs will recover with falling bond yields. Register for free here. 

Related links:

• Frasers Centrepoint Trust share price history and share price target
• Frasers Centrepoint Trust history and dividend forecasts

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