<Alert!> Frasers Centrepoint Trust – Acquiring an additional 10% stake in Waterway Point (WWP)
- Announced acquisition to acquire another 10% stake in WWP to bring mall ownership to 50%
- Purchase price at S$131.3m (10% stake) on par with previous acquisition stakes at c.4.5% cap rate
- Natural step forward to increase exposure to one of the largest core malls within the portfolio that is not fully-owned
- We currently have a BUY with TP of S$2.80
- Frasers Centrepoint Trust announced the acquisition of an additional 10% stake in Waterway Point (WWP).
- Purchase price values the mall at S$1,312.5m after taking into account net assets held by the holding company.
- Independent valuation of the property was at S$1,300m as at 31st July 2022, on a 4.5% cap rate.
- Total acquisition outlay of S$132.3m (including acquisition fees) will be funded by debt and internal sources.
Natural step forward for FCT’s WWP exposure. The additional 10% stake in WWP made available was due to the exit of Sekisui House from the asset. FCT’s acquisition was a natural step forward and with stake in the mall raised to 50%, from 40% previously. We understand the remaining 50% stake in WWP to be held by Far East Organization, a stake that could potentially be winded down further into FCT. Acquisition price and cap rate is on par with previous acquisition priced paid by FCT, valuing the mall at S$1,300m. Given recent acquisition cap rate for suburban retail coming in around the 4.4% – 4.5% cap rate, with the most recent being LREIT’s acquisition of JEM mall in Jurong, acquisition price for the additional 10% stake looks fair in our view. The deal is expected to be accretive on a NPI yield of 4.5% while funded with floating debt which we estimate to be less than 3.0%.
Riding on recovery upside for rents at WWP. Waterway Point is one of FCT’s core portfolio malls in the North-East part of Singapore, a relatively under-served area in terms of retail space per capita. It is also one of the larger malls within the portfolio, standing alongside Causeway Point and Northpoint City, while sharing similar dominant characteristics in Punggol hub, a growing residential catchment area. Similar to the performance of FCT’s suburban retail portfolio, tenant sales at WWP would likely to trend in the range of 100% – 115% of pre-COVID levels in calendar year 2022. Committed occupancy at the mall stood at 100% as at 30th Jun-22. With retail rents now at an inflection point in our view, we foresee higher upside in passing rents for WWP in the coming quarters alongside positive reversions in the range of 5% achieved by FCT.
FCT shopper traffic and tenant sales trend