SINGAPORE (Sept 26): Alexandra Technopark’s (ATP) nearly completed $45 million asset enhancement initiative (AEI) has prospective tenants asking themselves, “Why aren’t we here yet?”, says DBS analyst Mervin Song in a report.

The AEI involved the creation of a new amenity hub with futsal courts, end-of-trip facilities, exercise areas and meeting facilities. Furthermore, the lobby, lifts and toilets were refreshed.

"Signage for the property has improved and is now more prominent. The refresh, in our view, now gives the property a brighter and contemporary feel vs a “dated” design compared to other newer competing buildings in the Alexandra precinct," says Song.

ATP, which is part of Frasers Commercial Trust’s (FCOT) property, has attractive rents in the low $4 psf/mth vs $5-7psf/mth for nearby buildings and $10 psf/mth for CBD offices.

ATP generated $5.6 million in NPI in the last quarter, down from $9-10 million due to the staggered exit of the property by HP. Contribution to overall FCOT’s NPI has also fallen to 34% from low 40s previously.

In a recent site visit, Song says leasing enquiries have increased for the property with the AEI largely completed.

He believes this should translate to new leases soon, with FCOT backfilling space vacated by HP resulting in committed occupancy rising from 64.8% as at June 30.

“As committed occupancies improve, we believe the overhang from investors’ concerns over FCOT’s ability to backfill the space vacated by HP which has resulted in an elevated trading yield should be put to rest. This in our view should trigger a rerating,” adds Song.

DBS is maintaining its “buy” with $1.65 target price.

As at 10.13am, units in FCOT are trading at $1.44 giving it a FY20F distribution yield of 6.7%.