10 Quick Things to Learn From Frasers Centrepoint Trust’s Annual General Meeting

From time to time, Foolish hats turn up at annual general meetings (AGM).

As a unitholder of Frasers Centrepoint Trust (SGX: J69U), I had the opportunity to attend the real estate investment trust’s AGM held last Friday. Prior to the meeting, I also took some notes from the REIT’s annual report. You can find them here and here.

Without further ado, here are ten important things I picked up during Frasers Centrepoint Trust’s AGM:

  1. The REIT was listed on 5 July 2006, more than ten years ago. Most unitholders expressed satisfaction with the REIT’s past performance, but there were concerns on whether the future will look like the past. Most of the questions from investors at the AGM centred on Changi City Point and Northpoint. The former accounted for 13.3% of the REIT’s gross revenue in its fiscal year ended 30 September 2016 (FY2016) while the latter contributed 24.5%.
  2. Dr Chew Tuan Chiong, the chief executive officer of the REIT’s manager, said that the situation at Changi City Point will not stabilize until the MRT opens. I assume that he was referring to the expansion of the Expo MRT station to connect with the Downtown Line. In terms of tenants, Changi City Point’s catchment area might not be obviousFurthermore, the elephant in the room is Project Jewel in Changi Airport, which is expected to open in 2018. He said that it is possible that tenants are observing how the retail situation plays out. Over the longer term, he believes that Changi City Point will do fine.
  3. As already mentioned, questions were also raised on Northpoint. The mall is undergoing an AEI (asset enhancement initiative) to integrate with the retail component of Northpoint City. The latter is developed by the REIT’s sponsor, Frasers Centrepoint Ltd (SGX: TQ5). Philip Eng, Chairman of the REIT’s manager, said that there will be a seamless intergration with Northpoint; it will not be a situation of having two separate malls competing with each other.
  4. Dr Chew said that shopper traffic at Northpoint was very high. In FY2016, Northpoint’s shopper traffic was 45.2 million. In contrast, the shopper traffic at Causeway Point was 24.6 million despite the mall having a better monopoly of its area.
  5. Frasers Centrepoint Trust does not have the first right of refusal for Northpoint City. If a transaction is done, Dr Chew said that it will be done on a “willing seller, willing buyer” basis and it will be an arm’s length transaction.
  6. The separation between the REIT and its sponsor also received some attention. A question was posed on whether Frasers Centrepoint Trust was footing the bill for an AEI that would benefit Northpoint City and in turn, its sponsor. Christopher Tang, the chief executive for Frasers Centrepoint’s Singapore operations, was present at the AGM to offer some perspective. Tang said that the integration of Northpoint City will result in the combined mall having over 500,000 square feet of space, which will put it in the big league.
  7. Tang also stressed the seamless integration that will happen between Northpoint and Northpoint City. Shoppers will not be able to tell whether they are in Northpoint or Northpoint City. Dr Chew said that the management team for both malls will be the same. Eng added that the topic of conflict of interest was being discussed at the board level to ensure that there will be a fair process of tenant allocation between the two malls.
  8. Frasers Centrepoint Trust’s manager was also asked whether there will be cannibalization between Northpoint and Causeway Point. Dr Chew said that if he had to make a hunch, he would say that there will be a temporary decline but the situation would stabilize after that. He cited the example of the Jurong East cluster of malls. In this case, there was a dip in traffic as the cluster was on the same MRT line as Northpoint and Causeway Point (the North South line). Due to the size of both Northpoint and Causeway Point, he feels that the REIT is positioned well. The real challenge might be for the smaller malls located along the same North South MRT line.
  9. Unitholders at the AGM were also curious about the role of the REIT’s associate, the Malaysia-listed Hektar REIT. As a reminder, Frasers Centrepoint Trust has a 31.2% stake in Hektar REIT. One unitholder asked management whether they had considered selling the stake. Dr Chew said that the Hektar REIT stake is strategic as it gives the REIT a foothold in Malaysia. Frasers Centrepoint Trust might expand into Malaysia in the long-term.
  10. When asked about the biggest challenges in retail, Dr Chew mentioned a few. One would be regulatory changes. The second would be eCommerce. He feels that there will be a convergence of the online world and bricks-and-mortar retail. But how the convergence will look like in the future is still unclear to him. Dr Chew said that retail players may have to adapt to new lifestyle patterns of its customers.

There were more questions during the AGM and comments from management, but what I shared above are the key things that I was able to take note of. I hope you find them helpful. Fool on!

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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 units in Frasers Centrepoint Trust.