Frasers Centrepoint Trust to raise stake in owner of 5 suburban malls in Singapore for $197.2m

Hougang Mall is one of five shopping malls near MRT stations owned by ARF. PHOTO: SHIN MIN DAILY NEWS

SINGAPORE (THE BUSINESS TIMES) - Frasers Centrepoint Trust (FCT) is acquiring an additional 12.07 per cent stake in PGIM Real Estate Asia Retail Fund (ARF) for $197.2 million, in line with plans to bolster its presence in Singapore's suburban retail sector.

ARF is an open-end private-investment vehicle set up as a company, and the largest non-listed retail mall fund in Singapore. It owns five shopping malls near MRT stations - Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1; the Central Plaza office property in Singapore; and one retail mall in Malaysia.

ARF is managed by PGIM Real Estate, the real estate investment business of PGIM, the US$1 trillion global investment management business of Prudential Financial.

FCT now holds a 24.82 per cent interest in ARF, through its wholly-owned subsidiary FCT Holdings (Sigma). The acquisition, expected to be completed in July, will raise FCT's interest in the fund to 36.89 per cent.

FCT Holdings (Sigma) had exercised its right of pre-emption as a shareholder of ARF to buy the shares from certain shareholders that had indicated their desire to sell. Frasers Property Limited owns the remaining stake of about 63.1 per cent in ARF.

The acquisition is accretive to FCT's distribution per unit, based on the assumption that the deal had been effected at the beginning of FY2019. But with the acquisition, which will be fully funded by debt, FCT's pro forma gearing is 36.2 per cent as at Sept 30, 2019.

The net asset value of the stake as at March 31, 2020, amounts to about $194 million in total.

FCT's manager said in the exchange filing that the acquisition is in line with its principal investment strategy to acquire interests in quality income-producing properties used primarily for retail purposes, and to enhance FCT's presence in Singapore's suburban retail sector, so as to deliver regular and stable distributions to FCT's unitholders.

Richard Ng, chief executive of the manager, said: "The ARF portfolio of suburban retail malls shares similar characteristics to FCT's malls, which focus on essential spending and F&B trades as well as their locations in populous residential areas and close proximity to transportation nodes. These characteristics continue to underpin the resilience of the suburban retail sector, notwithstanding the difficult Covid-19 period."

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