Frasers Centrepoint Trust (SGX: J69), or FCT, is one of the few REITs to have done well in the last two years.
The retail REIT’s performance held up despite the twin challenges of elevated interest rates and soaring inflation.
It’s a testament to FCT’s resilience as its portfolio of suburban retail malls serves heartlanders who need to shop there for daily necessities and food.
However, investors may be wondering if the REIT can continue with this solid track record.
Can FCT become one of the few REITs that are posting higher distributions even with the persistent headwinds?
A robust financial performance
FCT is a pure-play Singapore suburban retail REIT, and investors who park their money in it can gain exposure to a portfolio of nine malls spread across Singapore, as shown below.
The REIT is also the largest prime suburban retail space owner with a 10.3% market share as of 31 October 2024.
This strong market position enables the REIT to attract quality tenants and also creates high tenant demand for its mall spaces.
The retail REIT announced a robust set of earnings for the first half of fiscal 2025 (1H FY2025) ending 31 March 2025.
Gross revenue rose 7.1% year on year to S$184.4 million, boosted by the completion of the asset enhancement initiative (AEI) at Tampines 1 along with higher occupancy and rental rates across its portfolio of malls.
Net property income (NPI) increased by 7.3% year on year to S$133.7 million.
FCT’s distribution per unit (DPU) inched up 0.5% year on year to S$0.06054.
This DPU increase was encouraging as FCT previously reported a slight year-on-year dip in its DPU for FY2024 because of the divestment of Changi City Point.
Healthy rental reversions with high occupancy
There are encouraging signs that the DPU momentum can continue.
The REIT’s retail portfolio occupancy stood high at 99.5% for the second quarter of FY2025 (2Q FY2025), dipping just slightly below the 99.9% recorded for 2Q FY2024.
FCT also posted a positive rental reversion of 9% for 1H FY2025, higher than the 7.5% reversion logged in 1H FY2024.
Notably, FCT’s rental reversion has seen an increasing trend.
FY2024 saw positive rental reversion of 7.7%, higher than the previous year’s 4.7%.
This increasing trend demonstrates the high demand for FCT’s portfolio of suburban malls and is a testament to the portfolio’s strength.
Both shopper traffic and tenant sales also recorded increases.
For 1H FY2025, shopper traffic improved by 1% year on year while tenant sales increased by 3.3% year on year.
FCT’s aggregate leverage stood at 38.6% as of 31 March 2025, in line with the level a year ago, but its cost of debt has fallen from 4.1% for 2Q FY2024 to 3.8%.
This fall is positive for the REIT as the manager can tap into more debt for yield-accretive acquisitions that will see a lower hurdle rate.
Portfolio enhancements and acquisitions
Speaking of acquisitions, FCT has been active in acquiring properties in the last few years.
Back in 2023, the REIT purchased an additional 10% stake in Waterway Point Mall for around S$132.3 million, raising its stake from 40% to 50%.
Early last year, FCT scooped up an additional 24.5% interest in NEX Mall for around S$523.1 million, increasing its ownership from 25.5% to 50%.
And just last month, the retail REIT completed the acquisition of a 100% stake in Northpoint City South Wing.
These acquisitions are all yield-accretive and show that management has a clear strategy in acquiring quality assets to boost the REIT’s asset base and DPU.
Then, there are also AEIs.
FCT completed its Tampines 1 AEI on schedule in August 2024.
The newly renovated mall achieved a 100% mall committed occupancy with a return on investment that exceeded 8%.
More than 9,000 square feet of net lettable area (NLA) was created and deployed to prime retail floors.
At the same time, the manager introduced 46 new-to-FCT concepts such as Hawkers’ Street, Sinpopo Brand, and Sushi Plus.
The latest AEI, which commenced in April 2025, is for Hougang Mall.
The manager has already secured several new-to-mall brands such as Lau Wang and Yangguofu to add to the mall’s selection of food and beverage offerings.
The AEI is projected to be completed by the third quarter of 2026 and should achieve a return on investment of around 7%.
Get Smart: A future-ready REIT
The evidence is clear.
FCT’s malls sport strong operating metrics and can continue to attract reputable tenants, as evidenced by the REIT’s consistently positive rental reversion.
Coupled with yield-accretive acquisitions and AEIs with positive returns, the REIT looks well-positioned to continue to deliver higher DPU in the years ahead.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
