4 Quick Things to Learn from Frasers Centrepoint Trust’s Annual Report

Reading the annual report of a company or investment trust is a great way to learn more about it.

I had recently read through the latest annual report from Frasers Centrepoint Trust (SGX: J69U), a retail-mall focused real estate investment trust (REIT). There are several important things I had picked out from the report which may be of interest to investors. Here are four of them:

1. A resilient property portfolio

“Our malls attracted a total of 97.2 million shoppers in FY2015 [fiscal year ended 30 September 2015], an increase of about 3% from FY2014.

Our suburban malls typically draw stable shopper footfall from residential catchment within 3 to 5 kilometres radius of the mall, and spending at the malls are substantially for necessities such as food and dining, groceries and services. These characteristics underpin the stability and resilient performance of our properties through economic cycles.”

In the excerpt above, Frasers Centrepoint Trust points out the resilience of its portfolio of suburban retail properties. Historically, rental rates for retail properties in suburban locations have held up fairly well across different economic climates.

2. Shopper traffic is a focus

“During the year, we have intensified our advertising and promotion efforts to help draw more shopper traffic to the malls. This include hosting more festive events and promotions at our malls and enhancing the Frasers Rewards loyalty program (which has over 300,000 members) to incentivise shoppers to patronise Frasers malls more often.”

Online shopping is providing the convenience of getting what you need without leaving your home – and that can be a threat to retail malls. In response, Frasers Centrepoint Trust is organizing events and instituting loyalty programs to attract shoppers to its locations.

For FY2015, the number of shoppers visiting the REIT’s malls increased by 3% year-on-year, as mentioned earlier. Shopper-traffic trends will continue to be an important area to watch.

3. Favorable leases

“Nearly all our leases include step-up clauses that provide for annual rental increment of between 1% and 2% during the lease term. In addition, 95% of the occupied leases include Gross Turnover rent (the “GTO”) clauses, which the tenants would pay between 0.5% and 1% of their sales as part of the gross rent under the lease agreements.”

Close to 100% of Frasers Centrepoint Trust’s leases come with step-up clauses. Additionally, 95% of the leases also have a GTO clause. These clauses can possibly provide further support for the REIT’s revenue in the future.

4. Funds for the future

“As at 30 September 2015, FCT [Frasers Centrepoint Trust] has a total capacity of $1,534 million from its sources of funding, of which $718 million or 46.8% has been utilised.”

At the end of FY2015, Frasers Centrepoint Trust had $816 million in available funding for refinancing or for funding acquisitions. This pipeline of money could be useful, as the REIT had an average debt maturity of just 1.6 years as at 30 September 2015.

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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 contributor Chin Hui Leong owns shares in Frasers Centrepoint Trust.