Frasers Property (FPL) announced a proposed optimisation of Fraser Hospitality Trusts’ (FHT) portfolio involving some $2.1 billion worth of assets which would raise EPS, ROE and NAV, and lower gearing.
The transaction involves reversing certain legacy arrangements previously put in place for FHT’s listing, including the removal of minimum fixed rental and corporate guarantee obligations by FPL.
FPL will also align ownership of property and operating companies, and unifying carved-out lease and reversionary interests for single title ownership to provide flexibility for asset value maximisation while maintaining platform scale and remaining selectively invested for value creation opportunities alongside TCC Group Investments, the existing co-owner of the FHT portfolio assets.
The proposed FHT portfolio optimisation will effectively allow FPL to unlock capital from stabilised assets while it continues to manage them for third-party capital and earns recurring fee income.
FPL can also retain exposure to assets with upside potential, hold the remaining non-core assets for future opportunistic divestment and consolidate full ownership of Fraser Suites Singapore, facilitating a potential redevelopment of the Valley Point site.
FPL's group CFO Loo Choo Leong says the company has been disciplined in improving capital efficiency, lowering gearing and enhancing returns and that the proposed FHT portfolio optimisation reflects that discipline in action.
"It frees up capital for higher-returns opportunities while maintaining our recurring income base by co-investing alongside our capital partner. This delivers clear positive effects on our balance sheet and key financial metrics," says Loo.
See also: Valley Point redevelopment on the cards under Frasers Property’s proposed FHT ‘optimisation’ plan
Eu Chin Fen, CEO of Frasers Hospitality notes that following the privatisation of Frasers Hospitality Trust in 2025, there has been a comprehensive review of the hospitality portfolio and reached clear conclusions on how each asset is best managed going forward.
"The proposed FHT portfolio optimisation is the outcome of that review which strengthens our platform while we continue to drive performance through our operating capabilities," adds Eu.
The proposed FHT portfolio optimisation secures an attractive, above-valuation pricing for FPL shareholders. The optimisation will be transacted with TCCGI at approximately 6.7% premium to latest independent valuation and 1.6% above the implied take-private valuation levels.
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Following completion, FPL’s on-balance sheet hospitality assets are expected to decrease from around $3.7 billion to $2.5 billion, while AUM maintains at $4.2 billion. FPL will continue to generate recurring income through its operating capabilities across the portfolio.
In addition, full ownership of Fraser Suites Singapore will enable the FPL to pursue potential redevelopment of the entire Valley Point site, providing further opportunities for value creation over the longer term.
The optimisation is expected to enhance FPL’s key financial metrics on a pro forma FY2025 basis: earnings per share increased by 3.4%; return on equity improved by 0.1 percentage points; net asset value per share increased by 1.3%; net gearing reduced by 3.3 percentage points.
The optimisation is subject to approval by shareholders entitled to vote at an EGM to be convened, as well as other conditions being fulfilled.
