SINGAPORE (THE BUSINESS TIMES) - The sale of Bedok Point by Frasers Centrepoint Trust (FCT) at $108 million raised questions from shareholders given that it was acquired at $129 million.
In response to shareholder queries ahead of FCT's extraordinary general meeting (EGM), the manager of FCT said that the mall's size constraint and the lack of direct connectivity to key transportation nodes limited its ability to be the dominant mall within Bedok Town Centre.
Despite proactive leasing and repositioning strategies to stabilise its performance, competition remained stiff due to larger and better located new retail offerings.
As part of a proactive portfolio management strategy, various asset enhancement and redevelopment options were also evaluated, said the manager.
Preliminary approval was obtained for its redevelopment into residential with limited commercial on first storey. The negotiated sale price of $108 million on the basis of Bedok Point as a redevelopment site was supported by two independent valuations. At the given valuation, the mall's net property income yield stood at 2.5 per cent.
The manager therefore believes that the sale of Bedok Point for redevelopment would be in the best interests of unitholders as asset value is optimised and capital is redeployed towards higher yielding investments.
Separately, FCT had on Sept 3 proposed to acquire the remaining 63.1 per cent of ARF it does not own for $1.06 billion. FCT intends to raise up to $1.39 billion in equity through a private placement and/or a preferential offering to fund the acquisition. Following the acquisition, the manager said that it will focus on optimising the performance of its enlarged portfolio.
This will be done through economies of scale in its operations and purchasing and outsourcing of contracted services. FCT will also look to strengthen its retail platform and savings in interest expense through refinancing of existing debts and increasing financial flexibility by unencumbering some of the portfolio properties.
FCT also intends to remain Singapore-centric and suburban retail focused. Opportunities for growth include the retail assets in the sponsor's portfolio, additional stake in Waterway Point which is currently held by three joint venture partners as well as third party opportunities that may present themselves from time to time, said the manager.
Completion of the proposed ARF acquisition and the proposed Bedok Point divestment are subject to unitholders' approval at the EGM to be held on Sept 28, and the fulfilment or waiver of the conditions under the ARF sale and purchase agreement and the Bedok Point put and call option agreement and purchase agreement.
Units in FCT closed at $2.52 on Friday, down $0.01 or 0.4 per cent.