Frasers Commercial Trust's NPI dropped 10.5% to $20.09m in Q2

It blamed lower occupancies at Alexandra Technopark and the sale of 55 Market Street.

Frasers Commercial Trust’s (FCT) net property income (NPI) slipped 10.5% YoY to $20.09m in Q2 2019 from $22.43m, an announcement revealed. Revenue also dipped 7.9% YoY from $33.01m to $30.4m.

The dismal performance was blamed on the lower occupancy rate for Alexandra Technopark, as well as the divestment of 55 Market Street on August 2018 and the effects of the average weaker AUD. As well, the firm added that lower gross revenue, higher property tax for Alexandra Technopark and higher amortisation of lease incentives for Central Park and 357 Collins Street continued to drag on the FCT’s earnings.

On the other hand, its distribution to unitholders edged up 5.2% YoY to $21.67m from $20.6m, whilst distribution per unit (DPU) remained unchanged at $0.024 from the previous quarter and Q2 2018.

FCT’s portfolio average committed occupancy rate as at 31 March 2019 was 81.5%, compared with 83.8% at the end of the previous quarter. Occupancy rates for the Singapore portfolio, the Australia portfolio and FBP as at 31 March 2019 were 67.5%, 94% and 98%, respectively.

“Occupancy for the Singapore portfolio has been affected mainly by the exits of Hewlett-Packard Enterprise Singapore and HewlettPackard Singapore from Alexandra Technopark,” the firm explained in its financial statement, adding that Frasers Commercial Asset Management (FCOAM) is in discussions with various prospective tenants to lease space at the property.

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Meanwhile, the improvement in the committed occupancy rate for its Australia portfolio to 94.% from 90.7% at the end of the previous quarter was mainly due to a take-up by WeWork of approximately 86,000 sqft of space at Central Park, representing around 12% of the total net lettable area of the property. With WeWork’s lease commitment, the committed occupancy rate for Central Park improved significantly to 83.5% as at 31 March 2019, from 71.5% as at 31 December 2018.

According to FCT, there are plans for the office lobby and forecourt areas at Central Park to undergo an asset enhancement initiative (AEI) to consolidate the property’s position as one of Perth’s premium grade business locations. Estimated to cost $23m, of which FCT’s 50% share will amount to $11.5m, the AEI is expected to commence in Q2 2019 and complete in Q3 2020.

At Alexandra Technopark, the $45m asset enhancement initiative (AEI) to rejuvenate and transform the property into a business campus was fully completed during the quarter. A new 13,300-square feet amenity hub provides connectivity to the two business space blocks and houses a wide array of food and beverage, social and other amenities. Similarly, at China Square Central, the ongoing $38m AEI to rejuvenate and reposition the retail podium at 18 Cross Street is expected to complete in the second half of 2019.

Whilst there remains uncertainties on the eventual outcome of Brexit, FCOAM said that it remains confident in the long-term prospects of the UK, and expects the performance of Farmborough Business Park (FBP) to remain stable given the property’s solid fundamentals, which include a high-quality tenant base, healthy occupancy rate of 98.0% and long weighted average lease to expiry (WALE) of 7.3 years, as at 31 March 2019.

The distribution for Q2 FY2019 will be paid out on 30 May.