Frasers Commercial Trust declines to co-invest in sponsor's Frasers Tower deal

The Frasers Tower office building.
The Frasers Tower office building.PHOTO: ST FILE

SINGAPORE - Frasers Commercial Trust (FCOT) has declined to participate as a co-investor in a Frasers Tower deal after receiving notice from sponsor Frasers Property Limited (FPL) under its right of first refusal agreement.

The agreement, which was entered into between the British and Malayan Trustrees Limited, acting in capacity as a trustee of FCOT and FPL in 2009, requires FPL to give notice to FCOT should it decide to sell the property.

FPL had given notice as the transaction, which will raise $442.7 million via the issue of new units of Aquamarine Star Trust (AST) to a long-term strategic investor, halves FPL's interest in the building from 100 per cent to 50 per cent.

FCOT said the balance 50 per cent interest in Frasers Tower owned by FPL after the investment will continue to be subject to the terms of the right of first refusal agreement.

FCOT's manager said it has considered the opportunity and believes the proposed investment or proposed terms, including the transaction amount "would not be accretive to the distribution per unit of FCOT".

It added it would continue to explore opportunities from both FPL and third parties to acquire commercial assets which meet its investment criteria, in order to achieve long-term growth for FCOT and its unitholders.

FCOT's regulatory update came late on Wednesday night (June 26) right before FPL announced the issue of new units of AST to the long-term strategic investor. FPL is the parent company of AST's trustee manager.

AST holds Frasers Tower, a 38-storey premium Grade A office development with a three-storey adjacent retail podium, located on Cecil Street. It has a total net lettable area of about 685,000 square feet and an agreed property value of $1.97 billion, negotiated between the investor and FCL Aquamarine.

FPL first disclosed in a regulatory announcement in April that it was in discussions with "certain parties" who expressed interest in Frasers Tower. It said at the time there was no certainty that any transaction would result from such discussions, in response to Bloomberg queries.

Last week, it was reported that South Korea's National Pension Service (NPS) is expected to take a stake in Frasers Tower, The Business Times understood at the time. Market watchers had noted that NPS has been doing exclusive diligence on the acquisition for some time, for a 50 per cent stake in the office building. The transaction is expected to value the entire property at just under $2,900 psf on net lettable area, or nearly $2 billion.

Units in FCOT were trading at $1.65 on Thursday as at 10.09am, down one cent or 0.6 per cent.