Here’s Why Frasers Commercial Trust Might Be Primed For Growth

It might be easy to think of all real estate investment trusts as a rather homogenous bunch, but the truth is not all REITs are created equal. The sponsor of a REIT plays a very important role in its ability to grow.

One REIT that may benefit from having a strong sponsor would be the aptly-named commercial real estate owner Frasers Commercial Trust  (SGX: ND8U). The trust is sponsored and managed by property developer Frasers Centrepoint Limited (SGX: TQ5).

Frasers Centrepoint had completed its acquisition of Australand, a key property developer and owner in Australia, late last year. Now that Frasers Centrepoint has a large portfolio in Australia, it can be a natural supplier of new real estate for Frasers Commercial Trust to acquire in the future. In fact, this is already happening.

Frasers Commercial Trust announced in late April that it wants to purchase a 25-storey office building in Melbourne, Australia for A$222.5 million from Frasers Centrepoint. When the announcement was first made, the trust’s Manager also mentioned that the acquisition is “expected to provide distribution per unit accretion to Unitholders.”

Both sponsor and REIT are also working together in other ways. In the same announcement regarding the acquisition of the Australia property, Frasers Commercial Trust also revealed that it’s looking to sign a long-term lease agreement with Frasers Centrepoint to allow the latter to develop a hotel at China Square Central. The deal might help improve the prestige, value, and rental rates of China Square Central, which is owned by Frasers Commercial Trust.

Both the Australia property acquisition and the hotel development are subject to approval from Frasers Commercial Trust’s unitholders; voting will take place in an Extraordinary General Meeting to be held on 22 June 2015.

Investors might also want to note that Frasers Centrepoint still has a long list of investment properties in its portfolio. And as a company which focuses on the development and management of real estate, its sponsored REITs – which of course include Frasers Commercial Trust –  are natural places for the company to transfer its investment properties and recycle capital for future development.

Foolish Take

There are many ways in which Frasers Commercial Trust can benefit from its relationship with Frasers Centrepoint Limited. It’s even more so now given the expanded pipeline of new real estate which can be injected into the REIT after Frasers Centrepoint had acquired Australand.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in Frasers Centrepoint Limited.