Commercial & Industrial Property News Update

Singapore - F&N's Diversification Could Result In Southeast Asia's Largest Real Estate Deal

September 11, 2012

The venerable company, which built its name as a soft-drink seller, could sell its property division for SGD 7.7 billion.

As 129-year-old conglomerate Fraser & Neave Ltd (FNN) seeks to let go of business assets, the largest property deal in Southeast Asia could come to fruition.

Starting off as a seller of soft drinks, FNN diversified into property and other businesses through its century-long history. The group currently holds a property portfolio anchored by one of Singapore's more renowned shopping complexes, Centrepoint, which is located in the heart of prime shopping district, Orchard Road.

Frasers Centrepoint Ltd, FNN's property arm, may be sold for as much as SGD 7.7 billion - representing a 71% premium over the value reflected in FNN's share price, according to Religare Capital Markets Ltd. Bloomberg data suggests that the property deal would be Southeast Asia's largest.

Retail rents in the island-state has remained high due to a population boom of 18% in the past five years, and high tourist arrivals of about one million per month.

Besides the 332,261 sq ft mall on Orchard Road, the portfolio includes over 7,000 furnished apartments from Europe to Australia. Market analysts believe that major foreign investors would circle the deal.

DMG & Partners Securities named Li Ka-Shing's Cheung Kong Holdings as a possible buyer, while Henderson Global Investors Ltd nominated Singapore's CapitaLand Ltd.

"These are big assets that don't often come onto the market," said Tim Gibson, Singapore-based head of Asia-Pacific property research at Henderson, which oversees more than USD 100 billion. "There'll be lots of interested parties. Getting your hands on these types of assets will be tough otherwise."

However, Religare's Tata Goeyardi believes that with FNN's total market value pegged at SGD 11.9 billion as of last week, the property unit is being undervalued by investors. Goeyardi's analysis estimates the portfolio at SGD 8.1 billion, but FNN's share price implies a value of only SGD 4.5 billion.

"What the share price is implying right now is that the property business is still undervalued," Goeyardi said. "There are several interested parties that we think would be complementary."

Tags: Commercial real estate, Shop for rent, Income properties

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