FCOT may sell assets in Japan, Australia

Source : Business Times - 23 Jan 2009

FRASERS Commercial Trust (FCOT) may sell its assets in Japan and Australia worth over $98 million, as it restructures its portfolio following a strategic review.

The trust said this yesterday as it released results for the fourth quarter ended Dec 31, 2008. Its performance was dampened by rising borrowing costs and higher property expenses.

Net property income for the trust fell 10 per cent year-on-year to $18.6 million in Q4 08. This contributed to a 41 per cent plunge in distributable income to $9.3 million.

As a result, distribution per unit (DPU) dived 43 per cent from a year ago to 1.26 cents. This translates to an annualised DPU of 5.01 cents, and a distribution yield of 21.3 per cent based on FCOT’s closing price of 23.5 cents on Dec 31. FCOT closed 0.5 cent up at 24.5 cents yesterday.

Of its portfolio of 10 assets, FCOT is exploring the sale of Cosmo Plaza in Japan and its investment in the Allco Wholesale Property Fund (AWPF) in Australia. A strategic review which began last August concluded that these assets ‘do not meet the long term investment strategy’ of the trust, said FCOT.

After further write- downs, Cosmo Plaza and units in the unlisted AWPF were valued at $72.6 million and $26.3 million respectively as of Dec 31.

‘Divestments of these assets will be conditional upon a number of factors and appropriate updates to unitholders will be made in due course,’ FCOT said.

On top of the possible asset sales, FCOT also said that it was deferring asset enhancement plans for retail areas in KeyPoint and China Square Central under the current economic and financial market conditions.

‘Management priorities include the refinancing of the trust’s existing facilities and addressing the capital structure of FCOT,’ said Low Chee Wah, CEO of the trust manager Frasers Centrepoint Asset Management (Commercial).

‘We are studying a variety of options and will look to begin implementing them during the course of the year.’

FCOT has $624.5 million of borrowings due in one year or less, and its gearing was 54.4 per cent as of Dec 31.

For FY2008, FCOT’s net property income rose 32 per cent from a year ago to $81 million. Nevertheless, its DPU still registered a 5 per cent drop to 6.35 cents.