Frasers Commercial Trust: (FCOT) 1QFY16 results were in line. DPU inched up 2% y/y to 2.51¢, despite distributable income jumping 18% to $19.7m, due to an expanded unit base arising from a private placement in 4QFY15.
Gross revenue climbed 12% to $39.6m while NPI grew 15% to $29.4m on higher rental rates, first full quarter contribution from 357 Collins Street (Melbourne), offset by weaker AUD and lower occupancy at China Square Central and Central Park (Perth).
China Square Central and Alexandra Technopark saw positive rental reversions of 10.3% and 5% in the quarter.
Portfolio occupancy was 92.9% (-2.5ppt q/q) with weighted average lease expiry of 3.3 years. Aggregate leverage remained flat q/q at 36.2% but all-in borrowing cost rose to 3.07% (+11bps q/q, +37bps y/y).
Of the 15.4% of leases due to expire in 2016, 7.6% are from its office assets, a relatively low number in a year of high office supply.
The office market Singapore is deteriorating. For the first time since 1Q09, the office market recorded a consecutive quarter of negative absorption.
Meanwhile, prospects for business parks are better, although rents are expected to remain flat.
In Australia, the Perth CBD office market remains weak, but the Melbourne CBD market is healthier, due to a structural migration of companies into the city centtre to hire and retain talent.
On its development projects, the 16-storey hotel at China Square Central will begin construction in 1Q16, and is expected to be completed ahead of time in mid-2019.
FCOT is currently trading at 8.3% annualised 1QFY16 yield, and 0.8x P/B
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