SINGAPORE (Apr 23): The manager of Frasers Centrepoint Trust (FCT) has announced distribution per unit (DPU) of 1.61 cents for 2QFY2020 ended March, some 48.7% lower than DPU of 3.14 cents in the same quarter last year.

The decline was mainly attributable to an enlarged unit base, as well as the retention of 50% of its distributable income to preserve financial flexibility during the Covid-19 pandemic.

Gross revenue for 2QFY2020 was up slightly at 0.9% to $50.2 million compared to last year’s $49.7 million. The growth was led by increase in gross rent from renewals, and step-up rents from existing leases. This was partially offset by lower turnover rent due to tenants’ sales, lower carpark income due to complimentary parking and expiry of car park management contract, and no rental atrium income from February this year.

Property operating expenses increased 6.9% to $14.2 million, from last year’s $13.3 million due to absence of property tax writebacks at Causeway Point, Changi City Point, and YewTee Point in 2Q19, as well as absence of carpark expenses at Anchorpoint. The Trust also raised its stake in Sapphire Star Trust (SST) which holds Waterway Point in 3Q FY2019.

Consequently, net property income fell some 1.3% to $36.0 million, from $36.4 million a year ago.

The group has rolled out a Tenant Support Package released on Feb 26, which passed on the 15% property tax rebate by the government. In the same package, the trust allowed tenants to convert security deposits paid in cash to Banker’s Guarantees to ease their cashflow challenges on a case-by-case basis. An additional $45 million in rental rebates was offered to tenants on Mar 27, to help tenants cushion the business impact due to Covid-19.

Income available for distribution this quarter rose 25% to $36.0 million from $28.8 million, due to contribution from FCT’s 24.8% interest in PGIM Real Estate AsiaRetail Fund (PGIM ARF) and 40% interest in SST at $6.0 million and $3.8 million respectively.

However, distributable income to unitholders fell 38.3% to $18 million, compared to last year’s $29.2 million, due to a larger base of unitholders, and higher amount of distributable income retained during the quarter.

FCT’s gearing stood at 37.4% as at March 31. The increase in the gearing from last quarter was due mainly to the drawdown of $80 million from its revolving credit facility on March 27 to repay a $90 million Medium Term Note (MTN) due on April 3. After the repayment of the $90 million MTN, the gearing is 33.3%.

The all-in cost of borrowing in 2QFY2020 was 2.44%, and the weighted average debt maturity was 2.13 years. FCT has about 50% of its borrowings on fixed or hedged to fixed interest rates.

In 1HFY2020, FCT has renewed 142 leases, accounting for 18.5% of its net lettable area (NLA), at an average rental reversion of 5.2%.

The portfolio occupancy as at March 31 was 96.1%, stable compared with the 96.0% a year ago. However, this was 1.2 percentage points lower compared with the previous quarter.

Its Weighted Average Lease Expiry (WALE) at end March stands at 1.83 years by its NLA, and 1.76 years by gross rental income (GRI).

2QFY2020 portfolio shopper traffic was 2.4% lower y-o-y. Traffic growth was positive in January, but registered sharp declines in February and March due to Covid-19. The portfolio tenants’ sales for the three-month period from December 2019 to February 2020 declined 4.0% y-o-y. This was attributed to the steeper sales decline due to lower shopper traffic. The Manager expects tenants’ sales for the next few months to be lower than February 2020 due to further impact from Covid-19, and circuit breaker measures.

Earnings per unit rose to 3 cents, compared to last year’s 2.84 cents.

As at end March, cash and cash equivalents stood at $105.1 million.

The REIT’s ex-date is April 30, and books close on May 4. Unitholders can expect to receive their DPU on May 29.

In its outlook, the manager says the combination of the detriment from Covid-19, as well as the related regulatory measures and the provision for rental rebates under the Tenant Support Package will have significant impact on FCT’s revenue, income available for distribution and cashflow for the remaining period of Financial Year 2020.

“The COVID-19 outbreak is unprecedented in its speed of transmission, severity and extent of its impact. This is a very challenging period for everyone... Our tenants are experiencing tough trading conditions as shopper traffic and tenants’ sales at our properties have been severely affected due to the COVID-19 outbreak. We will continue to monitor the COVID-19 situation and take appropriate measures to help FCT navigate through this difficult period,” says Richard Ng, chief executive officer of the manager.

Units in Frasers Centrepoint Trust closed 1 cent lower, or down 0.5%, at $2.10 on Wednesday.