Energy Transition | AI | Shifting World Order, Mint Finance

Suhas Reddy

Energy Transition | AI | Shifting World Order

Deep Fundamental Analysis

Mint Finance

Mint Finance's investment research blends deep fundamental analysis with technical & quant insights. Investment strategies straddle across multiple asset classes with risk management embedded into every trade to deliver an outsized reward-to-risk ratio.

Mint Finance's research is centered around three key themes. First, energy transition and climate change. Second, artificial intelligence. Third, shifting world order with its impact across politics and monetary economics.

Thematic (Sector/Industry)

<ul>
<li>Growth in commercial real estate to be subdued in 2024 due to weak demand, especially for office spaces.</li>
<li>Concerns over CRE loan defaults grow stronger as the industry faces a liquidity crunch.</li>
<li>Delinquency rates of commercial real estate loans rise for five consecutive quarters till Q32023.</li>
</ul>


Growth in commercial real estate to be subdued in 2024 due to weak demand, especially for office spaces.
Concerns over CRE loan defaults grow stronger as the industry faces a liquidity crunch.
Delinquency rates of commercial real estate loans rise for five consecutive quarters till Q32023.


Rough Road Ahead for US Commercial Real Estate but Industrial CRE Is Rooted to Outperform Others

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

US Treasury (10 Yr Generic) / Technical Analysis

<ul>
<li>Our bottom line is that we could not be bearish as long as the IWM is above $208, the IWC is above $134-$135, and the S&amp;P 500 is above 4495.</li>
<li>These support levels have held strong, and we are now seeing the aforementioned risk-off signals starting to abate.</li>
<li>This is an encouraging sign and we remain constructive as long as the above support levels hold.</li>
</ul>


Our bottom line is that we could not be bearish as long as the IWM is above $208, the IWC is above $134-$135, and the S&amp;P 500 is above 4495.
These support levels have held strong, and we are now seeing the aforementioned risk-off signals starting to abate.
This is an encouraging sign and we remain constructive as long as the above support levels hold.


Risk-Off Signals Abating; Cyclicals Reassert as Rates Rise; Buying Fertilizer and Copper Stocks

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2021-09/Reaching%20into%20rental%20homes%2C%20student%20housing.png' alt='Reaching into rental homes, student housing.png' />
 </figure>
 <div class='content-caption'>Reaching into rental homes, student housing.png</div>
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ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property in Texas, in the United States, which will be its third student accommodation asset investment this year.

While ART may be the first Singapore-listed trust to venture into student housing as S-Reits continue to diversify across property sub-segments, there are other Singapore-listed companies such as Singapore Press Holdings SPH: T39 +1.03% , Far East Orchard Far East Orchard: O10 -3.64% , Centurion Corporation Centurion: OU8 0% , Wee Hur Wee Hur: E3B 0% , and Metro Holdings Metro: M01 0% that invest, own, and manage purpose built student accommodation assets (PBSA).

According to Knight Frank, global investments in PBSA reached a record US$16.3 billion in 2018.

Savills considers the PBSA sector to be counter-cyclical and notes in a report that it was one of the few asset classes that showed resilience during the global financial crisis in 2008.

In addition, data collated by Jones Lang Lasalle (JLL) has shown that over a third of deals for student housing in 2021 so far have been by private equity firms, as investors continue to seek exposure to alternative real estate sectors.

ART's most recent acquisition is a freehold 1,005-bed student accommodation asset in Lubbock, Texas, for S$93.8 million. Wildwood Lubbock is a cottage-style property that is fully leased for the 2021 academic year and serves over 40,000 students from Texas Tech University.

The trust expects the acquisition to increase its pro forma FY2020 distribution per stapled security by approximately 1.5 per cent.

It also notes the longer average leases of student housing at one year, versus hotel stays.

ART has acquired four longer-stay accommodation assets this year, after expanding its strategy and diversifying its portfolio from traditional hospitality assets, further increasing its resilience and stable income.

Its two other student housing assets are in Atlanta (acquired in February 2021 for S$126.3 million) and South Carolina (acquired in June 2021 for S$73.4 million), both in the US.

In June 2021, ART also acquired three rental housing properties in Sapporo, Japan for S$85.2 million.

Following the acquisitions, ART's rental housing and student accommodation properties will comprise about 11 per cent of its portfolio value, up from 5 per cent in end 2020. It has a medium-term target to expand it to 15 to 20 per cent.

CDL Hospitality Trust CDL HTrust: J85 -0.85% (CDLHT) in July this year has announced that it is revising its principal investment strategy to include rental housing, student accommodation and senior housing assets.

The trust sees the revision of its strategy as a way to bring more diversification to its portfolio, enhance income stability as tenants typically have longer lengths of stay compared to hotels, and expand its range of investment opportunities given its broader mandate.

Singapore Press Holdings (SPH) has a portfolio of 28 PBSA assets in the UK with a total of 7,723 beds under its brands Capitol Students, Student Castle, and Galileo Residenz.

Far East Orchard owns a PBSA portfolio in the UK comprising over 3,500 beds in the cities of Brighton, Bristol, Leeds, Liverpool, Newcastle-upon-Tyne and Sheffield.

Centurion Corporation has a PBSA segment with 19 assets in Australia, South Korea, the UK and US that accounted for 25 per cent of its revenue in H12021.

Wee Hur Holdings' PBSA business is undertaken via two of its funds which manage two operational assets, one asset pending operations and the rest at various stages of development.

Metro Holdings' PBSA portfolio consists of two properties in Warwick and Bristol, in the UK, and a 7.3 per cent investment in the Mapletree Global Student Accommodation Private Trust. 

REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/ascott-joins-trend-of-hospitality-reits-pivoting-to-student-housing">read</a><a href="https://www.businesstimes.com.sg/companies-markets/10-s-reits-yielding-long-term-annualised-returns"> </a>the original version.
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    Reaching into rental homes, student housing.png


ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property in Texas, in the United States, which will be its third student accommodation asset investment this year.

While ART may be the first Singapore-listed trust to venture into student housing as S-Reits continue to diversify across property sub-segments, there are other Singapore-listed companies such as Singapore Press Holdings SPH: T39 +1.03% , Far East Orchard Far East Orchard: O10 -3.64% , Centurion Corporation Centurion: OU8 0% , Wee Hur Wee Hur: E3B 0% , and Metro Holdings Metro: M01 0% that invest, own, and manage purpose built student accommodation assets (PBSA).

According to Knight Frank, global investments in PBSA reached a record US$16.3 billion in 2018.

Savills considers the PBSA sector to be counter-cyclical and notes in a report that it was one of the few asset classes that showed resilience during the global financial crisis in 2008.

In addition, data collated by Jones Lang Lasalle (JLL) has shown that over a third of deals for student housing in 2021 so far have been by private equity firms, as investors continue to seek exposure to alternative real estate sectors.

ART's most recent acquisition is a freehold 1,005-bed student accommodation asset in Lubbock, Texas, for S$93.8 million. Wildwood Lubbock is a cottage-style property that is fully leased for the 2021 academic year and serves over 40,000 students from Texas Tech University.

The trust expects the acquisition to increase its pro forma FY2020 distribution per stapled security by approximately 1.5 per cent.

It also notes the longer average leases of student housing at one year, versus hotel stays.

ART has acquired four longer-stay accommodation assets this year, after expanding its strategy and diversifying its portfolio from traditional hospitality assets, further increasing its resilience and stable income.

Its two other student housing assets are in Atlanta (acquired in February 2021 for S$126.3 million) and South Carolina (acquired in June 2021 for S$73.4 million), both in the US.

In June 2021, ART also acquired three rental housing properties in Sapporo, Japan for S$85.2 million.

Following the acquisitions, ART's rental housing and student accommodation properties will comprise about 11 per cent of its portfolio value, up from 5 per cent in end 2020. It has a medium-term target to expand it to 15 to 20 per cent.

CDL Hospitality Trust CDL HTrust: J85 -0.85% (CDLHT) in July this year has announced that it is revising its principal investment strategy to include rental housing, student accommodation and senior housing assets.

The trust sees the revision of its strategy as a way to bring more diversification to its portfolio, enhance income stability as tenants typically have longer lengths of stay compared to hotels, and expand its range of investment opportunities given its broader mandate.

Singapore Press Holdings (SPH) has a portfolio of 28 PBSA assets in the UK with a total of 7,723 beds under its brands Capitol Students, Student Castle, and Galileo Residenz.

Far East Orchard owns a PBSA portfolio in the UK comprising over 3,500 beds in the cities of Brighton, Bristol, Leeds, Liverpool, Newcastle-upon-Tyne and Sheffield.

Centurion Corporation has a PBSA segment with 19 assets in Australia, South Korea, the UK and US that accounted for 25 per cent of its revenue in H12021.

Wee Hur Holdings' PBSA business is undertaken via two of its funds which manage two operational assets, one asset pending operations and the rest at various stages of development.

Metro Holdings' PBSA portfolio consists of two properties in Warwick and Bristol, in the UK, and a 7.3 per cent investment in the Mapletree Global Student Accommodation Private Trust. 

REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Ascott joins trend of hospitality Reits pivoting to student housing

Alpha-Centric ESG Research

Kyle Rudden

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:<ul>
<li>Affects firms doing business with U.K. asset managers/owners not just the managers/owners.</li>
<li>Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.</li>
<li>Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).</li>
</ul>This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:
Affects firms doing business with U.K. asset managers/owners not just the managers/owners.
Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.
Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).
This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

Frasers Logistics & Commercial Trust / Equity Bottom-Up

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-12/FLCT-CEO.jpg' alt='Robert Wallace' />
 </figure>
 <div class='content-caption'>Robert Wallace</div>
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Property veteran Robert Wallace dreams boldly, with both feet firmly planted on the ground.

“For me, it’s all about setting realistic, but ambitious, goals, and delivering on them,” said the Chief Executive Officer of the manager of SGX-listed Frasers Logistics &amp; Commercial Trust (FLCT), which was created by the S$6.0 billion merger between Frasers Logistics &amp; Industrial Trust (FLT) and Frasers Commercial Trust (FCOT) earlier this year.

“In whatever I do, I make sure I deliver on my promises – I guess you could describe me as dependable,” he smiled.

Wallace, who holds a Bachelor of Business (Property) from RMIT University and a Postgraduate Diploma in Applied Finance and Investment from Financial Services Institute of Australasia, began his career as a property valuer in Melbourne.

American author Mark Twain once famously wrote: “Find a job you enjoy doing, and you will never have to work a day in your life”, and Wallace is living proof of that.

“This is one mantra I stand by – I wanted to do something that I would enjoy, something tangible and concrete, so I chose real estate,” he said.

“You can easily achieve successful results with property once you understand the dynamics involved,” he added. “For every piece of real estate, there is a formula behind it. Once you understand that formula, in terms of its drivers and markets, you can always add value.”

Wallace has been CEO of the manager of FLCT since the trust’s listing on SGX in 2016. Before this appointment, the 49-year-old held senior management roles in Frasers Property Australia, formerly known as Australand Property Group. In the early 2000s, he was a Fund Manager at MAB Funds Management. Prior to that, he worked in advisory positions in Jones Lang LaSalle and Charter Keck Cramer.

The merger between Frasers's logistics and commercial REITs to form FLCT, proposed last December by way of a trust scheme of arrangement, was completed in April.

FLCT now has a mandate to principally invest in a portfolio of income-producing real estate used predominantly for logistics or industrial purposes, located globally, and/or commercial purposes or business park purposes, located in the Asia-Pacific region or Europe.

Its portfolio comprises 100 industrial and commercial properties, diversified across five major developed countries – Australia, Germany, Singapore, the UK and the Netherlands.

 

Opportunistic Focus

 

The REIT’s Sponsor is Mainboard-listed Frasers Property, a multinational owner-operator-developer of real estate products and services with total assets of about S$38.7 billion as at 30 September 2020. Its businesses span five asset classes – residential, retail, commercial &amp; business parks, industrial &amp; logistics, as well as hospitality.

The Sponsor has operations in Southeast Asia, Australia, Europe and China, and its well-established hospitality business owns and/or operates serviced apartments and hotels in more than 70 cities and 20 countries across Asia, Australia, Europe, the Middle East and Africa.

Expanding in the markets FLCT already has a presence in, as well as leveraging on its Sponsor’s right-of-first-refusal (ROFR) pipeline, will drive the REIT’s medium- to longer-term growth, Wallace noted.

“We’ll take advantage of our strong presence on the ground, as there are plenty of opportunities in our existing markets. We’re now of a sufficient size to hold developmental assets and enjoy the enhanced returns that such assets will bring.”

Strategic and accretive acquisitions are also on the cards. “We’re looking to buy from a medium- to long-term perspective, not just short-term,” Wallace noted.

“What we tend to do is grade all of our assets – we have about 100 properties within our portfolio – and for any new asset that we look at, hopefully we can put it in the top at least 25% of our portfolio in terms of returns to justify why we would acquire it,” he added.

FLCT applies the same rigour to its divestments. “We’re a reasonably active manager of our portfolio – we’re not afraid to sell if the time is right and the asset is non-core.”

In August 2020, the REIT Manager announced the acquisition of two fully occupied freehold properties in Australia and the UK, and the divestment of its remaining 50% interest in a cold-storage facility in Queensland, Australia.

Robust e-commerce trends also favour the industrial, and in particular, the logistics sector. As an asset class, logistics, which previously ranked third behind commercial and retail properties, has now risen to pole position in terms of demand, Wallace pointed out.

“Over the last six months, the transition towards e-commerce has gathered momentum – there’re structural changes developing in the distribution and delivery of goods to consumers, and these have become part of longer-term industry trends.”

This has been obvious in countries such as Germany, UK and the Netherlands, which are deep and early adopters of e-commerce. “Operators are moving from smaller to larger facilities to exploit economies of scale, while a number of third-party logistics providers are experimenting with the use of drones as part of their delivery systems,” he added.

 

Sustainability Commitment

 

The REIT’s progressive efforts on sustainability have also allowed it to attract and retain as tenants multinational corporations and local companies that place greater emphasis on green issues.

The REIT was named “Industrial – Global Listed Sector Leader” by the Global Real Estate Sustainability Benchmark (GRESB) for the third straight year. It is also the first industrial and logistics property owner to achieve six-star Green Star ratings for industrial facilities in New South Wales, Victoria, and Queensland.

While the outlook for FLCT remains relatively stable, the impact of the pandemic continues to create a challenging operating environment, Wallace admitted.

Additionally, competition for quality assets among investors remains stiff. “Industrials is an increasingly popular asset class in the key markets that we’re in, such as Australia and Europe,” he noted.

Another hurdle is meeting the increasingly advanced specifications from clients. “Some tenants have made significant investments in sorting and automation equipment, and these equipment are sometimes worth more than the building itself. So we need to be able to customise the set-up of such specialised facilities for them.”

Other issues that keep Wallace up at night include foreign currency movements and portfolio occupancy rates.

“We derive a significant portion of FLCT’s income from Australia, Europe and the UK, but distributions are delivered to investors in Singapore dollars,” he said. “The Aussie dollar can be volatile at times, and that’s what I’m always monitoring, as well as ensuring that our tenant retention rates remain high.”

“The one thing I’m proud of, is that over the last four years since listing, our portfolio has shown itself to be solid and reliable, performing in both challenging as well as good times.”

As at 30 September 2020, FLCT’s portfolio had an occupancy rate of 97.5% and a weighted average lease expiry (WALE) of 4.9 years. Aggregate leverage stood at 37.4%, with borrowings totalling S$2.5 billion, of which 54.6% were at fixed interest rates.

Its portfolio was valued at approximately S$6.2 billion, up from about S$3.2 billion a year ago, post-merger and acquisitions, as well as following a valuation uplift of its investment properties.

Work may be all-consuming, but Wallace makes it a point to spend time with his son, 19, and daughter, 17. “I always emphasise to them the benefits of hard work, and at the same time, the importance of enjoying life to the fullest – because you only have one.”

“Last but not least, they must always remember that every problem has a remedy,” he added. “Whatever challenge you are facing, there’s always a way through it – it may not be a fantastic solution, but it’s a solution, nonetheless.”    

 

Frasers Logistics &amp; Commercial Trust

Frasers Logistics &amp; Commercial Trust (FLCT) is a Singapore-listed REIT with a portfolio comprising 100 industrial and commercial properties, worth approximately S$6.2 billion, diversified across five major developed markets – Australia, Germany, Singapore, UK and the Netherlands. FLCT was listed on SGX Mainboard on 20 June 2016 as Frasers Logistics &amp; Industrial Trust and was subsequently renamed Frasers Logistics &amp; Commercial Trust on 29 April 2020,  following the completion of the merger with Frasers Commercial Trust. FLCT’s investment strategy is to invest globally in a diversified portfolio of income-producing properties used predominantly for logistics or industrial purposes located globally, or commercial purposes or business park purposes located in Asia Pacific or Europe (including UK). 
FLCT is sponsored by Frasers Property, a multinational owner-operator-developer of real estate products and services across the property value chain. Listed on SGX Mainboard and headquartered in Singapore, Frasers Property’s assets totalled approximately S$38.7 billion as at 31 March 2020.

The company website is: <a href="http://www.frasersproperty.com/reits/flct">www.frasersproperty.com/reits/flct</a> 
Click <a href="https://www.sgx.com/securities/equities/BUOU">here </a>for the company's StockFacts page. 
For the full year ended 30 September 2020 financial results, click <a href="https://links.sgx.com/1.0.0/corporate-announcements/BYINOS7O39I81KIY/638163_FLCT_FY2020_Results_Press_Release.pdf">here</a>.

 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBd-CspB86%24MfB90noBAABR54ZH/link10">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
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    Robert Wallace


Property veteran Robert Wallace dreams boldly, with both feet firmly planted on the ground.

“For me, it’s all about setting realistic, but ambitious, goals, and delivering on them,” said the Chief Executive Officer of the manager of SGX-listed Frasers Logistics &amp; Commercial Trust (FLCT), which was created by the S$6.0 billion merger between Frasers Logistics &amp; Industrial Trust (FLT) and Frasers Commercial Trust (FCOT) earlier this year.

“In whatever I do, I make sure I deliver on my promises – I guess you could describe me as dependable,” he smiled.

Wallace, who holds a Bachelor of Business (Property) from RMIT University and a Postgraduate Diploma in Applied Finance and Investment from Financial Services Institute of Australasia, began his career as a property valuer in Melbourne.

American author Mark Twain once famously wrote: “Find a job you enjoy doing, and you will never have to work a day in your life”, and Wallace is living proof of that.

“This is one mantra I stand by – I wanted to do something that I would enjoy, something tangible and concrete, so I chose real estate,” he said.

“You can easily achieve successful results with property once you understand the dynamics involved,” he added. “For every piece of real estate, there is a formula behind it. Once you understand that formula, in terms of its drivers and markets, you can always add value.”

Wallace has been CEO of the manager of FLCT since the trust’s listing on SGX in 2016. Before this appointment, the 49-year-old held senior management roles in Frasers Property Australia, formerly known as Australand Property Group. In the early 2000s, he was a Fund Manager at MAB Funds Management. Prior to that, he worked in advisory positions in Jones Lang LaSalle and Charter Keck Cramer.

The merger between Frasers's logistics and commercial REITs to form FLCT, proposed last December by way of a trust scheme of arrangement, was completed in April.

FLCT now has a mandate to principally invest in a portfolio of income-producing real estate used predominantly for logistics or industrial purposes, located globally, and/or commercial purposes or business park purposes, located in the Asia-Pacific region or Europe.

Its portfolio comprises 100 industrial and commercial properties, diversified across five major developed countries – Australia, Germany, Singapore, the UK and the Netherlands.

 

Opportunistic Focus

 

The REIT’s Sponsor is Mainboard-listed Frasers Property, a multinational owner-operator-developer of real estate products and services with total assets of about S$38.7 billion as at 30 September 2020. Its businesses span five asset classes – residential, retail, commercial &amp; business parks, industrial &amp; logistics, as well as hospitality.

The Sponsor has operations in Southeast Asia, Australia, Europe and China, and its well-established hospitality business owns and/or operates serviced apartments and hotels in more than 70 cities and 20 countries across Asia, Australia, Europe, the Middle East and Africa.

Expanding in the markets FLCT already has a presence in, as well as leveraging on its Sponsor’s right-of-first-refusal (ROFR) pipeline, will drive the REIT’s medium- to longer-term growth, Wallace noted.

“We’ll take advantage of our strong presence on the ground, as there are plenty of opportunities in our existing markets. We’re now of a sufficient size to hold developmental assets and enjoy the enhanced returns that such assets will bring.”

Strategic and accretive acquisitions are also on the cards. “We’re looking to buy from a medium- to long-term perspective, not just short-term,” Wallace noted.

“What we tend to do is grade all of our assets – we have about 100 properties within our portfolio – and for any new asset that we look at, hopefully we can put it in the top at least 25% of our portfolio in terms of returns to justify why we would acquire it,” he added.

FLCT applies the same rigour to its divestments. “We’re a reasonably active manager of our portfolio – we’re not afraid to sell if the time is right and the asset is non-core.”

In August 2020, the REIT Manager announced the acquisition of two fully occupied freehold properties in Australia and the UK, and the divestment of its remaining 50% interest in a cold-storage facility in Queensland, Australia.

Robust e-commerce trends also favour the industrial, and in particular, the logistics sector. As an asset class, logistics, which previously ranked third behind commercial and retail properties, has now risen to pole position in terms of demand, Wallace pointed out.

“Over the last six months, the transition towards e-commerce has gathered momentum – there’re structural changes developing in the distribution and delivery of goods to consumers, and these have become part of longer-term industry trends.”

This has been obvious in countries such as Germany, UK and the Netherlands, which are deep and early adopters of e-commerce. “Operators are moving from smaller to larger facilities to exploit economies of scale, while a number of third-party logistics providers are experimenting with the use of drones as part of their delivery systems,” he added.

 

Sustainability Commitment

 

The REIT’s progressive efforts on sustainability have also allowed it to attract and retain as tenants multinational corporations and local companies that place greater emphasis on green issues.

The REIT was named “Industrial – Global Listed Sector Leader” by the Global Real Estate Sustainability Benchmark (GRESB) for the third straight year. It is also the first industrial and logistics property owner to achieve six-star Green Star ratings for industrial facilities in New South Wales, Victoria, and Queensland.

While the outlook for FLCT remains relatively stable, the impact of the pandemic continues to create a challenging operating environment, Wallace admitted.

Additionally, competition for quality assets among investors remains stiff. “Industrials is an increasingly popular asset class in the key markets that we’re in, such as Australia and Europe,” he noted.

Another hurdle is meeting the increasingly advanced specifications from clients. “Some tenants have made significant investments in sorting and automation equipment, and these equipment are sometimes worth more than the building itself. So we need to be able to customise the set-up of such specialised facilities for them.”

Other issues that keep Wallace up at night include foreign currency movements and portfolio occupancy rates.

“We derive a significant portion of FLCT’s income from Australia, Europe and the UK, but distributions are delivered to investors in Singapore dollars,” he said. “The Aussie dollar can be volatile at times, and that’s what I’m always monitoring, as well as ensuring that our tenant retention rates remain high.”

“The one thing I’m proud of, is that over the last four years since listing, our portfolio has shown itself to be solid and reliable, performing in both challenging as well as good times.”

As at 30 September 2020, FLCT’s portfolio had an occupancy rate of 97.5% and a weighted average lease expiry (WALE) of 4.9 years. Aggregate leverage stood at 37.4%, with borrowings totalling S$2.5 billion, of which 54.6% were at fixed interest rates.

Its portfolio was valued at approximately S$6.2 billion, up from about S$3.2 billion a year ago, post-merger and acquisitions, as well as following a valuation uplift of its investment properties.

Work may be all-consuming, but Wallace makes it a point to spend time with his son, 19, and daughter, 17. “I always emphasise to them the benefits of hard work, and at the same time, the importance of enjoying life to the fullest – because you only have one.”

“Last but not least, they must always remember that every problem has a remedy,” he added. “Whatever challenge you are facing, there’s always a way through it – it may not be a fantastic solution, but it’s a solution, nonetheless.”    

 

Frasers Logistics &amp; Commercial Trust

Frasers Logistics &amp; Commercial Trust (FLCT) is a Singapore-listed REIT with a portfolio comprising 100 industrial and commercial properties, worth approximately S$6.2 billion, diversified across five major developed markets – Australia, Germany, Singapore, UK and the Netherlands. FLCT was listed on SGX Mainboard on 20 June 2016 as Frasers Logistics &amp; Industrial Trust and was subsequently renamed Frasers Logistics &amp; Commercial Trust on 29 April 2020,  following the completion of the merger with Frasers Commercial Trust. FLCT’s investment strategy is to invest globally in a diversified portfolio of income-producing properties used predominantly for logistics or industrial purposes located globally, or commercial purposes or business park purposes located in Asia Pacific or Europe (including UK). 
FLCT is sponsored by Frasers Property, a multinational owner-operator-developer of real estate products and services across the property value chain. Listed on SGX Mainboard and headquartered in Singapore, Frasers Property’s assets totalled approximately S$38.7 billion as at 31 March 2020.

The company website is: www.frasersproperty.com/reits/flct  
Click here for the company's StockFacts page.  
For the full year ended 30 September 2020 financial results, click here.

 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Frasers Logistics & Commercial Trust Pursuing Strategic Opportunities

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Jones Lang LaSalle Incorporated provides real estate and investment management services.  The Company serves multinationals, corporations, institutions, occupiers, and investors from offices in markets located around the world. Jones Lang provides services such as tenant representation, property management, agency leasing, finance, and valuations.

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