FCT to buy YewTee Point and Northpoint 2

Source : Business Times – 2 Nov 2009

FRASERS Centrepoint Trust (FCT) is now ready to inject another two retail malls into its portfolio, chief executive Christopher Tang told BT recently.

While Mr Tang did not say when exactly the two malls – YewTee Point and Northpoint 2 – are likely to be bought over from parent company Frasers Centrepoint Ltd, the trust and the malls are all ‘ready’, he said.

Both malls are now stable income-producing properties.

YewTee Point, located next to Yew Tee MRT Station, has seen almost a million shoppers since it soft opened in March this year. The mall, which has a net lettable area of 73,000 square feet, has achieved an occupancy rate of 98 per cent.

Northpoint 2 at Yishun – an extension of Northpoint, which is already part of FCT’s portfolio – is also now seeing good occupancy and footfall, Mr Tang said.

Buying the malls at this time will be yield-accretive for the trust, he said. Previously, as FCT was trading at higher yields (due to a lower share price), buying the properties would not have been yield-accretive.

‘FCT is now trading at 5 per cent above net asset value and FY2010 dividend per unit (DPU) yield of 6.4 per cent, which could mean that acquisition of Northpoint 2 and YewTee Point from its sponsor (about $300 million) could be accretive,’ wrote UBS Investment Research analysts Regina Lim and Michael Lim in an Oct 27 note.

Analysts have also said that FCT can be expected to raise equity for acquisitions soon. The UBS analysts, for example, expect FCT to raise around $130-$170 million in the next four months for acquisitions.

Said CIMB analyst Janice Ding: ‘We believe FCT will use equity and debt to fund its acquisition of Northpoint 2 and Yew Tee Point in a bid to increase its stock liquidity. We have assumed 25 per cent debt and 75 per cent equity for the acquisition.’

The planned injection of the two pipeline assets is also expected to expand FCT’s asset base significantly. UBS estimates that the exercise could lift portfolio size by 27 per cent to around $1.4 billion.

YewTee Point was officially opened last Saturday. With the mall, Frasers Centrepoint unveiled its new ‘neighbourhood’ mall concept.

A neighbourhood mall, Mr Tang explained, is more intimately-sized than a suburban mall and will serve the needs of its immediate community: ‘For instance, residents can enjoy early morning or late-night grocery-shopping at anchor tenant NTUC FairPrice supermarket, which opens its doors at 7am and closes at 11pm.’

Some F&B tenants will also be open until the early hours of the morning, he said.