JUST a month shy of 8 years since its initial public offering (IPO), the managers of Frasers Hospitality Trust (FHT) are ready to call it quits.

Frasers Hospitality Trust falls to a confluence of headwinds – are more S-Reits at risk?

By Anshuman Daga
Buildings are shrouded by haze in Singapore September 12, 2019. Photo: Reuters / FELINE LIM
Deals to take private Singapore's real estate investment trusts (REITs) are expected to gain momentum as the companies reel under rising interest rates and fierce competition to buy assets, bankers and analysts said. The trend in the sector, which is worth $7 billion, was underscored by a proposal this week by Frasers Property Ltd (FPL), part of Thai tycoon Charoen Sirivadhanabhakdi's TCC Group. FPL wants to take private its unit Frasers Hospitality Trust in a deal that values the target at $1.35 billion ($973 million). Hospitality REITs count large groups as their main shareholders. There has been a wave of consolidation among REITs in other sectors over the past couple of years as companies have sought scale and have expanded overseas. Prospects of a surge in take-private deals come against the backdrop of the industry's damage from the COVID-19 pandemic and its disruption to travel and tourism. "For the moment, hospitality and retail REITs which are sub-scale and trade at a big discount to now-lower net asset value (NAV) may be targets," said Quiddity Advisors analyst Travis Lundy, who publishes on the Smartkarma research platform. Singapore's REIT market is dominated by retail investors attracted to the firms' high dividends. REITs in Singapore must pay out 90% of their rental income, whereas a similar form of investment, called property trusts, need not. "In hospitality REITs and commercial REITs, takeovers are scale-merit opportunities but take-privates like Frasers are really more about corporate strategy and opportunism than about industrial logic," said Lundy. Singapore had 44 REITs and property trusts with a combined market value of S$117 billion, according to Singapore Exchange research published in May. Frasers Hospitality Trust (FHT) has the second least valuable collection of assets among five listed hospitality trusts on the Singapore bourse. Others include Ascott Residence Trust, CDL Hospitality Trusts and Far East Hospitality Trust. The other is diversified OUE Commercial REIT, which has investments in both commercial and hospitality sectors. FHT's net asset value has declined since its listing in 2014, partly because of the sector's muted growth and the strengthening of the Singapore dollar against its operating currencies, it and FPL said. "The proposed privatization of Frasers Hospitality Trust by its sponsor should result in a positive kneejerk reaction on hospitality S-REITs (REITs in Singapore) which are still trading at discounts to their NAVs as valuation plays catch-up in the face of the ongoing hospitality recovery," said Citi analyst Brandon Lee. He said in a report he expected the deal to result in "deeper evaluation by sponsors managing REITs currently trading at deep discounts to NAVs, as assets under management growth becomes increasingly challenging in the face of the rising cost of capital, especially for the smaller ones." The offer price of S$0.70 a share for FHT represented a 44% premium to its volume-weighted average price in the 12 months to April 7, the day before a strategic review was announced. The offer valued it at 1.07 times its NAV, while FHT's peers trade at lower valuations, analysts said. FHT said its small size had limited its ability to reap benefits from its listing. "There's so much competition to buy assets, even from private equity players. With interest rates rising, funding assets to boost scale becomes even more challenging," said one banker familiar with REIT deals. ($1 = 1.3896 Singapore dollars)

Singapore Hospitality Trusts Seen As Ripe For More Take-private Deals

06/15/2022 | 11:35pm EDT
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SINGAPORE (Reuters) -     Deals to take private Singapore's real estate investment trusts (REITs) are expected to gain momentum as the companies reel under rising interest rates and fierce competition to buy assets, bankers and analysts said. The trend in the sector, which is worth $7 billion, was underscored by a proposal this week by Frasers Property Ltd (FPL), part of Thai tycoon Charoen Sirivadhanabhakdi's TCC Group. FPL wants to take private its unit Frasers Hospitality Trust in a deal that values the target at $1.35 billion ($973 million). Hospitality REITs count large groups as their main shareholders. There has been a wave of consolidation among REITs in other sectors over the past couple of years as companies have sought scale and have expanded overseas. Prospects of a surge in take-private deals come against the backdrop of the industry's damage from the COVID-19 pandemic and its disruption to travel and tourism. "For the moment, hospitality and retail REITs which are sub-scale and trade at a big discount to now-lower net asset value (NAV) may be targets," said Quiddity Advisors analyst Travis Lundy, who publishes on the Smartkarma research platform. Singapore's REIT market is dominated by retail investors  attracted to the firms' high dividends. REITs in Singapore must pay out 90% of their rental income, whereas a similar form of investment, called property trusts, need not. "In hospitality REITs and commercial REITs, takeovers are scale-merit opportunities but take-privates like Frasers are really more about corporate strategy and opportunism than about industrial logic," said Lundy. Singapore had 44 REITs and property trusts with a combined market value of S$117 billion, according to Singapore Exchange research published in May. Frasers Hospitality Trust (FHT) has the second least valuable collection of assets among five listed hospitality trusts on the Singapore bourse. Others include Ascott Residence Trust, CDL Hospitality  Trusts and Far East Hospitality Trust. The other is diversified OUE Commercial REIT, which has investments in both commercial and hospitality sectors. FHT's net asset value has declined since its listing in 2014, partly because of the sector's muted growth and the strengthening of the Singapore dollar against its operating currencies, it and FPL said. "The proposed privatization of Frasers Hospitality Trust by its sponsor should result in a positive kneejerk reaction on hospitality S-REITs (REITs in Singapore) which are still trading at discounts to their NAVs as valuation plays catch-up in the face of the ongoing hospitality recovery," said Citi analyst Brandon Lee. He said in a report he expected the deal to result in "deeper evaluation by sponsors managing REITs currently trading at deep discounts to NAVs, as assets under management growth becomes increasingly challenging in the face of the rising cost of capital, especially for the smaller ones." The offer price of S$0.70 a share for FHT represented a 44% premium to its volume-weighted average price in the 12 months to April 7, the day before a strategic review was announced. The offer valued it at 1.07 times its NAV, while FHT's peers trade at lower valuations, analysts said. FHT said its small size had limited its ability to reap benefits from its listing. "There's so much competition to buy assets, even from private equity players. With interest rates rising, funding assets to boost scale becomes even more challenging," said one banker familiar with REIT deals. ($1 = 1.3896 Singapore dollars)
(Reporting by Anshuman Daga; Additional reporting by Gaurav Dogra in Bengaluru; Editing by Sumeet Chatterjee and Bradley Perrett)
By Anshuman Daga

Singapore hospitality trusts seen as ripe for more take-private deals

Singapore hospitality trusts seen as ripe for more take-private deals
A photo of private property in Singapore. (Photo: iStock/Joesboy)
16 Jun 2022 11:49AM (Updated: 16 Jun 2022 12:00PM)
SINGAPORE: Deals to take private Singapore's real estate investment trusts (REITs) are expected to gain momentum as the companies reel under rising interest rates and fierce competition to buy assets, bankers and analysts said. The trend in the sector, which is worth US$7 billion, was underscored by a proposal this week by Frasers Property Ltd (FPL), part of Thai tycoon Charoen Sirivadhanabhakdi's TCC Group. FPL wants to take private its unit Frasers Hospitality Trust in a deal that values the target at US$1.35 billion ($$973 million). Hospitality REITs count large groups as their main shareholders. There has been a wave of consolidation among REITs in other sectors over the past couple of years as companies have sought scale and have expanded overseas. Prospects of a surge in take-private deals come against the backdrop of the industry's damage from the COVID-19 pandemic and its disruption to travel and tourism. "For the moment, hospitality and retail REITs which are sub-scale and trade at a big discount to now-lower net asset value (NAV) may be targets," said Quiddity Advisors analyst Travis Lundy, who publishes on the Smartkarma research platform. Singapore's REIT market is dominated by retail investors attracted to the firms' high dividends. REITs in Singapore must pay out 90 per cent of their rental income, whereas a similar form of investment, called property trusts, need not. "In hospitality REITs and commercial REITs, takeovers are scale-merit opportunities but take-privates like Frasers are really more about corporate strategy and opportunism than about industrial logic," said Lundy. Singapore had 44 REITs and property trusts with a combined market value of S$117 billion, according to Singapore Exchange research published in May. Frasers Hospitality Trust (FHT) has the second least valuable collection of assets among five listed hospitality trusts on the Singapore bourse. Others include Ascott Residence Trust, CDL Hospitality Trusts and Far East Hospitality Trust. The other is diversified OUE Commercial REIT, which has investments in both commercial and hospitality sectors. FHT's net asset value has declined since its listing in 2014, partly because of the sector's muted growth and the strengthening of the Singapore dollar against its operating currencies, it and FPL said. "The proposed privatization of Frasers Hospitality Trust by its sponsor should result in a positive kneejerk reaction on hospitality S-REITs (REITs in Singapore) which are still trading at discounts to their NAVs as valuation plays catch-up in the face of the ongoing hospitality recovery," said Citi analyst Brandon Lee. He said in a report he expected the deal to result in "deeper evaluation by sponsors managing REITs currently trading at deep discounts to NAVs, as assets under management growth become increasingly challenging in the face of the rising cost of capital, especially for the smaller ones." The offer price of S$0.70 a share for FHT represented a 44 per cent premium to its volume-weighted average price in the 12 months to Apr 7, the day before a strategic review was announced. The offer valued it at 1.07 times its NAV, while FHT's peers trade at lower valuations, analysts said. FHT said its small size had limited its ability to reap benefits from its listing. "There's so much competition to buy assets, even from private equity players. With interest rates rising, funding assets to boost scale becomes even more challenging," said one banker familiar with REIT deals. Source: Reuters/yb

Piti A Sahakorn/LightRocket via Getty Images
Frasers Property —controlled by Thai billionaire Charoen Sirivadhanabhakdi— has offered to buy Frasers Hospitality Trust (FHT) in a deal valuing the Singapore-listed real estate investment trust at S$1.35 billion ($970 million). The offer comes as Frasers Hospitality—which manages 14 hotels and serviced residences with more than 2,600 rooms across key gateway cities in Asia, Australia and Europe—faces headwinds brought on by the Covid-19 pandemic that has upended the travel and tourism industry in the past two years. Despite improvements in occupancy levels, revenue per available room at its properties are still well below pre-pandemic levels, according to FHT. Under the deal, which is subject to regulatory approvals, Frasers Property is offering to buy the rest of the REIT that it doesn’t own at S$0.70 per share, the real estate giant said in a regulatory filing on Monday. The Singapore-listed developer currently owns 25.8% of FHT, while Charoen’s TCC Group holds another 36.7% with minority investors owning the rest. “Following our proactive strategic review to unlock value for our stapled securityholders and having considered the long-term challenges facing FHT, we believe that the proposed trust scheme is the best option and represents a credible opportunity for our stapled securityholders to realize their investments at an attractive valuation,” Eu Chin Fen, CEO of FHT managers, said in a statement. While the hospitality business environment is improving as governments around the world relax Covid-19 travel restrictions, uncertainties arising from the ongoing pandemic and geopolitical tensions following Russia’s invasion of Ukraine prevail. “We anticipate the recovery trajectory to remain bumpy due to headwinds from inflationary pressures as a result of continued supply chain disruptions, rising energy, commodity and labor costs, leading to the potential risk of an economic slowdown,” Eu said in April as FHT announced its first half results ending March 31. MORE FOR YOU

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