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Business Times
26-05-2025
- Business
- Business Times
Frasers Property's privatising FHT does nothing for its minorities
[SINGAPORE] Minority investors of Frasers Hospitality Trust (FHT) are getting a second chance to exit their holdings by way of a privatisation offer. FHT's sponsor Frasers Property recently proposed privatising the stapled group at S$0.71 per stapled security via a trust scheme of arrangement. In September 2022, Frasers Property's earlier attempt to privatise FHT at S$0.70 per stapled security narrowly failed to get requisite support from minority stapled securityholders. Frasers Property's latest offer price is at a 10.7 per cent premium to FHT's end-March net asset value (NAV) per stapled security of S$0.6416. The offer price represents a 18.3 per cent, 25.4 per cent and 36.3 per cent premium to the last-transacted, three-month and 12-month volume-weighted average price prior to Apr 23, respectively, when the boards of FHT's managers announced the managers were conducting a review of FHT's strategy. Various reasons were cited as rationale for the proposed privatisation including macroeconomic headwinds and FHT's smaller scale relative to its peers. Also, despite revenue per available room at FHT's assets recovering to pre-Covid levels, inflationary cost pressures and other macroeconomic challenges have constrained meaningful distribution per stapled security (DPS) growth. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up Frasers Property's perspective However, while FHT's minority investors are being given what looks to be a financially attractive offer, spare a thought for Frasers Property's minority shareholders. Spending resources in trying to privatise FHT, which made its trading debut in 2014, may not help improve Frasers Property's financial or share price performance. Frasers Property is facing macroeconomic headwinds while it has net debt of S$15.1 billion and net debt/total equity of 88.5 per cent as at end-March. Should it be raising its investment in FHT's portfolio of hospitality assets, whose prospects are challenging, when the property group ought to work harder to reduce leverage given a tough economic climate? FHT owns hotels and serviced residences in Singapore, Malaysia, Australia, Japan, UK and Germany. For the six months ended Mar 31, FHT's net property income declined 2.5 per cent from the year before because of elevated property taxes, utility costs driven by inflation and other property-related expenses. Due to lower net property income and higher finance costs, the trust's DPS fell 6 per cent year on year. Can Frasers Property, which is active across various business lines, find better ways to deploy its capital than investing more in FHT? The stapled group owns various overseas assets in countries whose currencies may depreciate further against the Singapore dollar. Moreover, Frasers Property loses valuable recurring management fees from managing FHT should it be privatised. Importantly, Frasers Property is trying to privatise FHT at a premium to book value, when the group itself trades way below book value. As at Friday (May 23), Frasers Property traded at a discount of 66 per cent to its end-March NAV per share of S$2.38. In short, equity market investors implicitly apply a hefty discount to Frasers Property's hospitality assets – potentially all of FHT's assets plus other hospitality ones that the group owns outside of FHT. Herein lies the critical need for Frasers Property's board of directors to clearly articulate what it plans to do with the FHT portfolio and its other hospitality assets. Perhaps, Frasers Property can increase the pace of selling hospitality assets. The group recently completed the divestment of Capri by Fraser in Barcelona, Spain. Last year, Tuan Sing bought Fraser Residence River Promenade, a serviced apartment development with 72 units, three conservation warehouses and 47 car park lots, located at Jiak Kim Street, from Frasers Property for S$140.9 million. Private fund option Can Frasers Property do better holding its hospitality assets in private funds compared with listed trusts? Possibly, private funds may value the group's hospitality assets more richly than the listed space. Maybe, Frasers Property can bundle its hospitality assets to sell to a private fund which the group holds a minority stake in and manages, based on latest independent asset valuations. In this way, Frasers Property lightens its balance sheet, earns management fee income and improves return on equity. Besides being FHT's sponsor, Frasers Property is a sponsor of Frasers Centrepoint Trust and Frasers Logistics & Commercial Trust (FLCT), which are both members of the benchmark Straits Times Index. While the former trades well relative to book value, the latter trades way below its latest NAV per unit. If the private fund route works, maybe FLCT can be privatised with its properties, then put into a private fund. While Frasers Property deserves kudos for being a responsible sponsor by offering FHT's minority investors a clean exit on financially reasonable terms, the property group has to be accountable to its shareholders. Frasers Property might see hospitality as a core business and have a long-term investment view – still, it must work harder to improve capital efficiency to benefit its shareholders. Ultimately, Frasers Property's board should emulate what the boards of FHT's managers did by conducting a review of Frasers Property's strategy. Its free float is small – about 11 per cent of its shares are held by the public, based on its latest annual report. TCC Assets, which is linked to Thai tycoon Charoen Sirivadhanabhakdi, owns around 86.9 per cent of Frasers Property. Given Frasers Property's small free float and deep discount to book value, the most plausible way to unlock value for its shareholders could be for Charoen to lead a consortium to privatise Frasers Property. Might the local bourse soon lose not only FHT but also Frasers Property, which is active in mixed-use, residential, retail, office, business park, logistics and industrial properties and has footprints in Singapore, Australia, Europe, China and South-east Asia? Privatisations and delistings are part of any functioning listed equities market. And minority investors of target entities will welcome receiving privatisation offers so long as these are not lowball ones. As privatisations play out on the local exchange, stakeholders working on developing Singapore's equities market must work fast and hard to make the local bourse more vibrant. (The writer owns shares in Frasers Property)
Business Times
25-05-2025
- Business
- Business Times
Will more S-Reits soon exit the local market?
WHEN the proposed privatisation of Frasers Hospitality Trust (FHT) was unveiled on May 14, I couldn't help feeling rather disheartened – not with the terms of the transaction but with the stated rationale for the deal. The decision to take FHT private, which came after a strategic review announced on Apr 23, seems to be based on a strong conviction on the part of its managers that the hospitality trust will face great difficulty growing its distributions per stapled security (DPS) and net asset value (NAV) in the face of a number of macroeconomic trends and structural factors. In particular, higher interest rates since the Covid-19 pandemic have increased FHT's debt costs, and weighed on the market value of its stapled securities. The relative strength of the Singapore dollar has also adversely affected FHT's DPS and NAV, as 59 per cent of its nearly S$2 billion property portfolio is located outside of Singapore – in Australia, Japan, Malaysia and the United Kingdom. Then, there is the general volatility of the hospitality sector, and periodic capital expenditure necessary to maintain the attractiveness of its hotel properties. Since FHT was listed in July 2014 up to the day before the strategic review was announced in April this year, Singapore-listed hospitality trusts achieved an average annualised total return of just 0.79 per cent, according to a presentation deck provided by FHT's managers. In the wake of this weak performance, the market valuations of hospitality trusts have naturally eroded. FHT traded at an average of 0.95 times NAV during the period spanning its listing in July 2014 until March 2020. Its peers – namely, CapitaLand Ascott Trust, CDL Hospitality Trusts, and Far East Hospitality Trust – traded at an average of 0.89 times NAV during the same period. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up During the Covid-19 pandemic period, from March 2020 to May 2023, FHT traded at an average of 0.76 times NAV while its peer group traded at 0.81 times NAV. Subsequently, from May 2023 until the strategic review was announced in April 2025, FHT traded at an average of 0.73 times NAV while its peers traded at an average of 0.72 times NAV. Are Singapore-listed hospitality trusts still useful securitisation platforms for their respective sponsor groups given their weak market valuations? Is it just a matter of time before we see more of them going private? Sagging performance, valuations Here's the thing: FHT and its peers aren't the only Singapore-listed real estate investment trusts (S-Reits) under pressure. Higher interest rates have weighed on the performance and market valuations of all S-Reits; and the strength of the Singapore dollar has been a drag on the returns of every S-Reit with significant overseas exposure. While the annualised total return of 0.79 per cent that FHT and its peers delivered between July 2014 and April this year was certainly weak, many other S-Reits didn't perform all that much better. According to the presentation deck provided by FHT's managers, S-Reits focused on commercial properties returned an average of just 3.61 per cent per year during the same period, while industrial and logistics S-Reits returned 4.92 per cent a year. The best performance came from 'specialised' S-Reits – such as Parkway Life Reit and Keppel DC Reit – which achieved an average annualised total return of 10.07 per cent during the period. Against this backdrop, it is perhaps not surprising that the crop of S-Reits reportedly coming to market are focused on burgeoning new sectors such as data centres, healthcare assets and student accommodation. Meanwhile, managers of S-Reits focused on traditional sectors and struggling to garner decent market valuations may have to rethink their business plans, and whether it makes sense to maintain their listings. This isn't exactly a new trend. Several S-Reits have been acquired or subsumed over the years as their sponsor groups adjusted their strategies and reached for scale. For instance, CapitaLand Integrated Commercial Trust is the result of the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust. Mapletree Pan Asia Commercial Trust came about through the amalgamation of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT). These deals did not always go smoothly. The merger of MCT and MNACT, for instance, faced minority shareholder resistance on both sides of the transaction. Mapletree Investments, the sponsor group behind the two Reits, eventually stumped up S$2.2 billion in cash to push the deal through. Is going private the next big trend for S-Reits as their managers and sponsor groups try to deliver value? FHT's managers said on May 14 that a number of options were considered to unlock value for investors. These included boosting the yields and valuations of FHT's existing properties through asset enhancement initiatives (AEIs), and scaling up FHT through a big merger or acquisition. In the end, however, it was decided that exiting the public market made the most sense. FHT's bid to go private comes on the heels of a similar move at Paragon Reit. In February, Paragon Reit's manager said privatisation would facilitate a major AEI at its flagship property, which accounts for 72 per cent of the value of its property portfolio. The manager said the AEI could cost as much as 21 per cent of the property's appraised value, and is necessary to defend its competitiveness amid growing competition from nearby properties and softer spending on luxury goods. Paragon Reit's privatisation deal, which will see investors receiving S$0.98 per unit, equivalent to 1.07 times NAV, was given the green light last month. Privatisations may boost sentiment While the privatisation of FHT and Paragon Reit might raise questions about the future of the S-Reit sector, the expectation of more such deals could well boost investor sentiment. The big question is whether investors are adequately compensated by the offerors. In the case of FHT, investors are being offered S$0.71 per stapled security by a unit of Frasers Property (FPL). This is 1.11 times FHT's adjusted NAV – higher than the average 1.04 times NAV at which precedent S-Reit privatisations since 2020 were priced; and well above the 0.62 times NAV at which hospitality trusts trade in the market. The offer price of S$0.71 also implies a total return of 27.8 per cent for investors who bought FHT at its initial public offering in 2014. FHT's peers delivered total returns over the same period ranging from minus 6.3 per cent to 24.5 per cent. One sticking point for some investors is that FPL narrowly failed to take FHT private at S$0.70 per share back in 2022, at a time when the hospitality sector was still reeling from the pandemic. It should be pointed out, however, that the previous offer price was only 1.07 times FHT's NAV. With the rise in interest rates since then, FPL could also be hard pressed to justify paying much more for FHT – especially with its own shares trading 65.5 per cent below NAV.
Business Times
14-05-2025
- Business
- Business Times
Citing worsening macro conditions, Frasers Property renews bid to take Frasers Hospitality Trust private
[SINGAPORE] Frasers Property is proposing to privatise Frasers Hospitality Trust (FHT) at S$0.71 per stapled security, due to FHT's inability to improve the distribution and growth of FHT in the face of macroeconomic headwinds. This is the second time in three years that Frasers Property has attempted to privatise the stapled group. It tried to do so in September 2022 for S$0.70 per stapled security, though the privatisation attempt failed then after being voted down by shareholders. In a statement on Wednesday (May 14), FHT's manager said the decision followed a strategic review of FHT amid a worsening macroeconomic environment. It said a weaker foreign exchange rate against the Singapore dollar and a higher interest rate environment, among other factors, have made it more difficult for the managers of FHT to grow its distribution and net asset value (NAV). The current offer price of S$0.71 apiece implies a 1.11 times, or 11.1 per cent, premium over its NAV, and exceeds the implied average premium over NAV of former Singapore real estate investment trust (Reit) privatisations since 2020 of 1.04 times. As at the time of the announcement, FHT has issued about 1.9 billion stapled securities. 'We have put forward an offer for FHT which safeguards the interests of Frasers Property's shareholders. The arm's length offer was arrived at after taking into consideration the financial and business effects of the privatisation to Frasers Property, both over the short and long term, in addition to a number of FHT financial reference points,' said Loo Choo Leong, group chief financial officer of Frasers Property. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up During a briefing to the media on Wednesday afternoon, Eric Gan, chief executive of FHT's manager, said the macroeconomic environment has gone 'further south' since the last attempt to privatise FHT in 2022. 'Foreign exchange has continued to weaken further. Interest rate has risen, further impacting us,' he said. The Covid-19 pandemic has also had a 'significant, lasting impact' on FHT's valuation. While FHT was trading at 0.95 times its NAV prior to the pandemic, the trust's valuation has become 'worse' after the pandemic, trading at 0.73 times its NAV, said Gan. FHT has faced challenges attracting capital flow due to its scale and size. As a small Reit and small float, it is unable to attract institutional investors to grow meaningfully. It also does not have as much debt headroom as its peers to engage in acquisitions. Privatisation route offers 'certainty' During FHT's strategic review last month, the board considered several options to unlock the trust's potential value, said Gan. These include keeping FHT listed, but potentially divesting selected assets or rebalancing its portfolio. The manager also considered selling the entire platform to a third party and distributing the net proceeds to securityholders. However, the board eventually agreed that privatisation was the best way forward, as it would allow stapled securityholders to immediately realise their investment at a premium to NAV. It would also offer certainty as it will be executed by the sponsor, which has obtained the financial resources to conduct the privatisation exercises. Gan was optimistic that the manager would be successful in its bid to privatise FHT this time around. In 2022, Frasers Property attempted to privatise the stapled group for S$0.70 per stapled security. However, the resolution narrowly missed the minimum approval level of votes representing 75 per cent of units required for it to be passed at the September 2022 scheme meeting. It attained favourable votes representing 74.88 per cent of units from around 70.91 per cent of stapled securityholders. Gan was of the view that the latest offer price of S$0.71 is 'a lot higher' than S$0.70 when compared in terms of the premium it offers on the NAV. While the previous offer of S$0.70 was at a 7 per cent premium to NAV, the latest offer is higher at 11 per cent. Said Gan: 'Don't just look at one cent, but look at the percentage. I think that speaks volumes, because 11.1 per cent is a lot higher than any of the other metrics.' On May 6, FHT reported a 6 per cent drop in its distribution per stapled security to S$0.010257 for its first half year ended Mar 31, from S$0.01091 in the corresponding year-ago period, in light of lower net property income (NPI) and higher finance costs. NPI for the period fell 2.5 per cent on the year to S$43.5 million from S$44.7 million, while revenue rose 0.9 per cent to S$63.8 million from S$63.3 million in H1 FY2024, due to increased contributions from Koto no Hako – the retail component of ANA Crowne Plaza Kobe – and higher other income. The scheme is expected to be effective by end-August 2025, subject to the approval of the scheme stapled securityholders and various other conditions being fulfilled. The scheme meeting for stapled securityholders is expected to be in late July. Stapled securities of FHT were trading flat at S$0.665 as at 2 pm on Wednesday, following the lifting of a trading halt.
Straits Times
14-05-2025
- Business
- Straits Times
Frasers Property makes second bid to privatise Frasers Hospitality Trust in $1.37 billion deal
FHT has a portfolio of 14 hotels and serviced residences across nine cities in Asia, Australia and Europe. It includes InterContinental Singapore (pictured. PHOTO: LIANHE ZAOBAO SINGAPORE - Thai billionaire Charoen Sirivadhanabhakdi's Frasers Property is making a second attempt to take private its hospitality real-estate investment trust at a valuation of $1.37 billion. The company on May 14 announced an offer of 71 cents per share for Frasers Hospitality Trust (FHT). This represents a 7 per cent premium to FHT's last traded price of 66.5 cents before the counter announced a trading halt on May 13. It is also a 36.3 per cent premium to the FHT's volume weighted average price for the 12-month period up to the last trading date. Frasers Property owns a 24.23 per cent stake in FHT, while its majority shareholder and Mr Charoen's family conglomerate TCC Assets has a 36.72 per cent stake. An attempted privatization in 2022 at 70 cents a share - which valued FHT then at $1.35 billion - failed when it fell short of a 75 per cent shareholder threshold required. The latest offer to take the trust private is the outcome of a strategic review conducted by the directors of the trust after they evaluated various options, both companies said in a joint statement. They cited challenges due to the changing macroeconomic environment, such as a weaker foreign exchange rate against the Singapore dollar, higher interest rate environment, global cost inflation and unforeseen events such as Brexit and the Covid-19 pandemic. 'The directors view the privatisation as a viable option for stapled securityholders to immediately realise their investment at a premium to net asset value and offers strong deal certainty in terms of timing and execution,' they said. 'Frasers Hospitality Trust is expected to continue to face both macroeconomic headwinds and structural limitations which may limit its ability to grow its distribution per stapled security and net asset value,' they added. The hospitality trust's smaller size relative to its peers has also contributed to a higher cost of equity and lower debt headroom which limits its ability to scale up, they said. Its properties are also located in areas where the currencies have depreciated significantly - by 20 per cent to 30 per cent - against the Singapore dollar since its listing, they noted. FHT has a portfolio of 14 hotels and serviced residences across nine cities in Asia, Australia and Europe. The properties include InterContinental Singapore, Fraser Suites Sydney and Park International London. Listed on the SGX mainboard since 2014, FHT has a market capitalisation of $1.27 billion, with a portfolio valued at $2 billion as of Sept 2024. The trust's managers chief executive officer Eric Gan said: 'The decision to propose this scheme was not taken lightly. The scheme will require the necessary regulatory and court approvals, and is subject to the approval of a majority of its stapled securityholders. Frasers Property group chief financial officer Loo Choo Leong said the group's strategy is focused on delivering sustainable and targeted long-term returns across cycles. 'Hospitality is a core business for Frasers Property, and while we remain mindful of near-term challenges facing the hospitality sector, we maintain a long-term investment perspective,' he said. Frasers Property, which also called for a trading halt on May 13, has total assets of approximately $38.9 billion as at March 31. It operates across commercial and business parks, hospitality, industrial and logistics, residential and retail, with businesses in South-east Asia, Australia, Europe, Britain and China. It also owns or operates serviced apartments and hotels in 20 countries across Asia, Australia, Europe, the Middle East and Africa. Sue-Ann Tan is a business correspondent at The Straits Times covering capital markets and sustainable finance. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
04-05-2025
- Business
- Business Times
S-Reits rebound 9.5% from Apr 9 lows, tracking volatility in global markets
[singapore] The performance of Singapore-listed real estate investment trusts (S-Reits) in April 2025 was marked by significant movements, reflecting the broader volatility in global markets. The iEdge S-Reit Index declined by 1.9 per cent over the month, slightly outperforming the Straits Times Index, which dropped 2.3 per cent. Furthermore, S-Reits outperformed the FTSE Epra/Nareit Global Reits Index, which saw a more substantial decline of 3 per cent. The performance of the 30 constituents of the iEdge S-Reit Index was mixed in April, with 22 decliners and eight gainers. The three biggest decliners for the month were Manulife US Reit , Mapletree Logistics Trust (MLT) and ESR-Reit . On the other hand, the three strongest performers were Frasers Hospitality Trust (FHT), Frasers Centrepoint Trust (FCT) and CapitaLand Integrated Commercial Trust (CICT). The performance in April was non-linear, with considerable fluctuations in the market. The iEdge S-Reit Index experienced a decline of 10.5 per cent from the end of March to Apr 9, followed by a rebound of 9.5 per cent from Apr 9 to 30. These movements tracked the volatility observed in global markets, as investors weighed tariff developments. All 30 constituents of the iEdge S-Reit Index recorded gains over the three weeks from Apr 9 to 30. The three biggest gainers were Prime US Reit , CapitaLand China Trust and FHT. The top 10 performers in the iEdge S-Reit Index over the three weeks also mostly saw net institutional inflows, with a combined figure of S$23.2 million. Despite the tumultuous month, S-Reits managed to stay in positive territory in the year to date as at Apr 30, with a total return of 0.8 per cent. This was in contrast to the FTSE Epra/Nareit Global Reits Index, which was down by 3 per cent over the same period. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up Around half of the iEdge S-Reit Index constituents delivered positive total returns in the year to date as at Apr 30. The top three gainers for the first four months of 2025 were Parkway Life Reit , CICT and FHT. April also saw notable fund flows in the S-Reits market. Institutional and retail investors were net sellers. Institutional investors net sold S$90.3 million, and retail investors net sold S$54.6 million over the month. The Reits that experienced the largest outflows from institutional investors included MLT, Mapletree Industrial Trust and ESR-Reit. Meanwhile, the Reits that saw the largest outflows from retail investors were CICT, FCT and CapitaLand Ascendas Reit . Conversely, certain Reits managed to attract net buying from both institutional and retail investors. On Apr 29, Stoneweg European Reit (Sert) announced that it successfully obtained unitholders' approval for the proposed stapling to form the Stoneweg European Stapled Trust – comprising Sert and Stoneweg European Business Trust. The proposed stapling is aimed at allowing the trust to maintain a competitive edge by offering enhanced tax efficiency, flexibility for future operations and broader scope for future investments. The trust's strategy, mandate and asset class focus remain unchanged. However, the business trust can undertake development projects, but with no intention to increase development exposure to above 10 per cent on a long-term basis. The trust remains committed to maintaining a 35 to 40 per cent medium-term aggregate leverage target, with a ceiling of 45 per cent. SGX RESEARCH The writer is a research analyst at SGX. For more research and information on Singapore's Reit sector, visit for the S-Reits & Property Trusts Chartbook.
