Frasers Commercial Trust (FCOT)

[gzbkel]

The 2015AR is out.
http://infopub.sgx.com/Apps?A=COW_CorpAn...FY2015.pdf

The NPI for 357 Collin is 1.856 million for the period from 18 Aug to 30 Sep.
If we annualize that, we get about 16.13 million.
Using the purchase price of 226.6 million, the property yield is 7.1%, which is higher than the forecast of 6.3%.

Looking at the page 53 of the AR, the cap rate for prime office in Melbourne has decreased to 5%, from an average of about 6.5% for the past few years.

Even if we use the more conservative forecast of 6.3%, it seems that FCOT got a rather good deal. Or am I missing something?

[tikam tikam]

As far as I am concerned, as of today (27th of January, 2016) people are selling with low volume and therefore I think low conviction (check SGX website). Although human psychology shouldn't play a part in a value investment forum, I just thought to say that i) I don't believe the sellers, and ii) so long as acquisitions are not overly ambitious or leveraged (as they were in the GFC), this commercial REIT still seems to grow by way of making acquisitions...

[CY09]

http://infopub.sgx.com/FileOpen/FCOT_Ann...eID=471646

FCOT's main tenant, HP Entreprise will not be renewing its tenancy. As of now, FCOT has secured for only about15% of the vacated premise.

Quite a big hit to the potential DPU of the REIT. It seems HP Inc Pte Ltd itself has not renewed its tenancy due this year as well. Let's see how the discussions will go with HP. Inc. I predict it will be a smaller rental area taken by them but not a complete withdrawal from Alexandra Park.

[choya]

Could be related this news in 2014? - http://www.mapletreeindustrialtrust.com/...0News.aspx

HP also sold 2 building 450/452 Alexandra Road in 2013 to UE - http://www.straitstimes.com/business/uni...02-million. 450 Alexandra Rd location is more strategic compared to other HP buildings in that area.

Anyway old guards of IT - HP, IBM are retreating.

http://infopub.sgx.com/FileOpen/FCOT_Ann...eID=471646

FCOT's main tenant, HP Entreprise will not be renewing its tenancy. As of now, FCOT has secured for only about15% of the vacated premise.

Quite a big hit to the potential DPU of the REIT. It seems HP Inc Pte Ltd itself has not renewed its tenancy due this year as well. Let's see how the discussions will go with HP. Inc. I predict it will be a smaller rental area taken by them but not a complete withdrawal from Alexandra Park.

[CY09]

Hi Choya,

Yes it could be. HP Entreprise's new HQ has been built up. The worry now is that there is space for HP Inc. to move in as well. This will help HP as a group reap cost savings. If it happens, about 15% of FCOT Net property income is lost.

[WH Cheng]

BBerg reported last week that HP will be cutting 5000jobs - hence cost-savings drive is going-on.

This event we are seeing is a very true reflection of a TENANT CONCENTRATION RISK (TRC) materialising into a real negative event !!! Tenant Concentration Risks are very real,... bros,....

The 'irritating' thing here is : WHY DID HP ENTERPRISE ANNOUNCE SO LATE TO US ? We don't have a chance to mitigate this problem now ,... Moving out at end-September after announcing at EIGHT DAYS EARLIER ? Pls enlighten me if I am wrong in my presumptions here,...

Otherwise, the Landlord has every right to 'penalise' HP Enterprise with TWO MONTHS of dividends to be withheld,.... Unitholders has rights here too,....

[CY09]

Unless it is stated in the contract that they must announce their intention not to renew within a specific time frame. It is perfectly alright for tenants to do a last minute pull up.

It is similar to many deals where both parties are unable to agree to the terms and because of the difference, there is no renewal and is announced on the last few days, long enough for the tenant to vacate.

[yeokiwi]

The 'irritating' thing here is : WHY DID HP ENTERPRISE ANNOUNCE SO LATE TO US ? We don't have a chance to mitigate this problem now ,... Moving out at end-September after announcing at EIGHT DAYS EARLIER ? Pls enlighten me if I am wrong in my presumptions here,...

"that it intends to vacate an aggregate of 178,843 square feet (“sf”) of space at Alexandra Technopark (“ATP”) upon the expiration of relevant leases on 30 September and 30 November this year. "

Since the lease was not renewed, FCOT should have expected it, isn't it?
Same as renting your room to someone, if the lease ends, it ends.

[HitandRun]

Based on my experience (which might or might not be representative of the industry), the tenancy agreement will typically have a clause stating that the tenant must give the landlord 3 to 6 months of notice (from rental expiry date) of intention to renew.

I'm pretty sure FCOT had earlier notice than 22nd Sep => that's why they were able to market and secure a new tenant for 24,000 sqft to be vacated by HPE.

The fact that FCOT is still in negotiations with HPS at this late stage (~2 months from 30 Nov) suggests that HPS is probably looking to reduce their footprint in Alexandra Technopark as well.

[WH Cheng]

Tq,.. In my Tenancy Agmt with my Tenant, I have a clause stating that the Tenant must notify the Landlord at least 2 months prior to expiry, of their intention to renew or not to renew. Otherwise, I reserved the right to forfeit the two-months deposit.

I'd be surprised if FCOT does not have this clause in their Lease Agreement with the HP companies... We should ask FCOT if they have such clauses, and if not,... why not ?

Then again - if FCOT could secure a tenant SO FAST after the ann't to terminate the lease, then I would presume FCOT knew abt the termination earlier,... for which they did not announce to unitholders,...

Again,... why is this so ??