Frasers Property reports S$158 million profit in 1H FY22

Frasers Property Limited, the parent company, announced its financial results for its first half year ended 31 March 2022 revealing a S$158m profit helped by a strong Industrial & Logistics focus.

Mr Panote Sirivadhanabhakdi, Group Chief Executive Officer of Frasers Property, commented, “We are heartened that the path to normalcy has become clearer in recent months as we transition to an endemic environment. Around the world, there are pockets of recovery, paving the way for economies to grow out of the effects of the pandemic. Rising business costs and a volatile global environment will continue to test our agility and resilience as an organisation.”

“We have been able to leverage our solid foundation to continue delivering earnings even as we navigated business challenges. This is a result of years of work to strengthen our core – prioritising portfolio resilience through exposure in sectors, such as industrial and logistics, and geographies supported by steady fundamentals, building upon our organisational structure and investing in our people and processes. We are confident that Frasers Property is ready to take advantage of the gradual recovery and pursue growth opportunities arising from structural changes accelerated by the pandemic to deliver value.”

Frasers Property Australia reported a profit before interest and tax of A$9 million. CEO, Anthony Boyd says “the company has seen strong residential sales activity, while activity in the retail and commercial sectors regathers momentum. 

Frasers Property Australia Highlights include;

  • In 1H FY22, 729 residential units were released for sale and 949 were sold.  
  • 370 residential units were completed and settled in 1H FY22. 
  • A$1.4 billion (S$1.4 billion) in unrecognised revenue as at 31 March 2022.  
  • A ~252-hectare site in New Beith, QLD, was secured in 1H FY22. The site is expected to yield ~2,150 lots, with contract completion expected in October 2022. 
  • Residential development pipeline comprises ~14,000 units as at 1H FY22. 
  • Largest sales contributors in 1H FY22 include Five Farms, VIC (176 units); The Grove, VIC (141 units); Mambourin, VIC (129 units); Berwick Waters, VIC (95 units); Brookhaven, QLD (75 units); Ed.Square, NSW (70 units); and Wallara Waters JV, VIC (57 units). 
  • Construction of 366 apartments at the Brunswick & Co. Build-to-Rent project in Fortitude Valley commenced in 1H FY22, as part of the QLD Government’s Build-to-Rent pilot.   
  • Planning and design is progressing on the ~A$3.0 billion Central Place Sydney project, a key component of the NSW Government’s Tech Central innovation precinct. Frasers Property Australia and Dexus are 50-50 joint venture partners on the development, with approvals anticipated in 2022. 
  • The office and retail investment portfolios are valued at S$1.6 billion and S$0.4 billion respectively, with a weighted average lease expiry of 2.4 years and 6.7 years respectively.   
  • The strategic repositioning of Rhodes Corporate Park is underway and leasing for Eastern Creek Quarter Stage 2 (ECQ XL) in NSW has been strong in 1H FY22, with only one tenancy remaining ahead of a mid-2022 launch.

“We are preparing for numerous new residential project and stage releases which will contribute to secured sales contracts at the end of the year. We are also managing delivery programs which should see FY22 settlements skewed toward the second half of the financial year, in line with previous years,” Mr Boyd says. 

“Having dealt with ongoing COVID-related challenges, our focus now is on navigating the evolving market fundamentals. We have doubled down on our focus on quality and sustainability across our communities and, as such, our customer value proposition is well-established and our brand is well-placed for the flight to quality we anticipate will characterise the next economic cycle, particularly in the residential market. 

“The recent pick-up in retail activity and the repositioning work we are undertaking across our commercial portfolio will support future performance, with our diversification across market segments and geographies a key advantage.” 

Frasers Property Limited also operates the Frasers Property Industrial business which spans Australian and European markets and reported profit before interest and tax of S$207 million (A$210.1 million & EUR 137.4) for 1H FY22, with assets under management of S$10.9 billion (A$10.8 billion & EUR 7.2 billion).

Reini Otter, CEO, Frasers Property Industrial says that with a sizeable portfolio and development pipeline, the company continues to capitalise on the strong market dynamics. 

“Demand from customers seeking to future-proof their operations and supply chains post-pandemic, combined with historically low vacancy rates and record high property values, continues to fuel our strong growth. At a sector level, the past few years have proven industrial and logistics assets as critical social infrastructure and vital to the functioning of our cities. This means more than ever, our focus as an industry leader is on innovating in the areas of wellbeing, sustainability, and technology and creating long-term value for customers, investors and our employees. 

 “With a S$10.9 billion (A$10.8 billion & EUR 7.2 billion) portfolio, a sizeable pipeline of 15 assets worth S$1.2 billion (A$1.2 billion & EUR 0.8 billion) currently in development and a 2.9 million sqm strategically positioned landbank, we are well-positioned to take advantage of the strong market conditions. Near 100% occupancy levels across our multi-national portfolio and strong lease renewals are a testament to the success of our strategy of developing quality, future-ready industrial and logistics facilities.” 

Frasers Property Industrial highlights include;

  • Frasers Property Industrial’s assets under management valued at S$10.9 billion (A$10.8 billion & EUR 7.2 billion) as at 31 March 2022. 
  • Investment portfolio comprises 154 completed properties across six countries, equating to 4.0 million sqm of net lettable area (NLA):  
    • Australia:  
      • Non-REIT portfolio consisting of 28 completed assets with a total value of S$1.6 billion (A$1.6 billion & EUR 1.1 billion) 
    • Europe:  
      • Non-REIT portfolio consisting of 25 completed assets with a total value of S$1.0 billion (A$1.0 billion & EUR 0.7 billion) 
  • Frasers Property Industrial’s multi-national expertise delivered a network to support customers’ businesses across geographies, fuelling high-quality tenant demand:  
    • Currently developing 15 projects totalling 487,000 sqm and GDV of S$1.2 billion (A$1.2 billion & EUR 0.8 billion) including 14 in Australia and one in Europe, planned for completion in the next two years.  
  • A strategically positioned landbank totalling 2.9m sqm across Australia and Europe, with 479,000 sqm added in Australia in 1H FY22. 
  • Realised strong leasing activity in 1H FY22 with renewals and new leases of 222,000 sqm and 136,000 sqm in Australia and Europe, respectively. Australian portfolio 100% occupied with a weighted average lease expiry (WALE) of 4.9 years and 97.8% occupancy in Europe with 6.0 years WALE.   

Looking Ahead

Supported by its solid foundation that provides clear earnings visibility, the Group is ready to take advantage of the next wave of opportunities. Leveraging the Group’s multi-asset class capabilities and portfolio with S$42.8 billion of assets under management, the Group is well-placed to deliver real estate offerings and services that meet evolving customer demands amid structural changes as well as the entrenchment of ESG6 values in decision making among multiple stakeholders.

Over 80% of the Group’s property assets are in recurring-income based asset classes, which provides a firm earnings foundation. Adopting a rigorous and disciplined approach to drive investment portfolio income, the Group achieved approximately 724,000 square metres of renewals and new leases in total in 1H FY22 across its investment properties portfolio.

Fuelled by the proceeds from the rights issue concluded in April 2021, the Group has been steadily growing its industrial and logistics development pipeline. As at 19 April 2022, the Group has utilised more than S$500 million out of the allocated S$700 million. The Group has 15 development pipeline projects across Australia and Europe with a total gross development value of S$1.2 billion to be delivered over the next 18 months. The Group has also been growing its pipeline of industrial and logistics development projects in Thailand and Vietnam, and recently completed the acquisition of the second tranche of land at the Group’s first industrial development project in Vietnam – Binh Duong Industrial Park.

The Group’s development capabilities enable Frasers Property to deliver innovative, value-adding properties. Beyond the built-to-suit industrial and logistics developments tailored to the specifications of customers that Frasers Property is known for, under the premium estates concept launched in November 2021, new industrial and logistics estates will be developed to industry-leading building design standards and guidelines that prioritise efficiency, sustainability, health and wellbeing. The first premium estates project will be delivered in Australia from FY23. In anticipation of growing customer demand for flexible workspaces, the Group has also introduced core and flex commercial space solutions as part of its focus on real estate as a service. To be completed by end FY22, Silom Edge is a mixed-use ~21,000 sqm NLA7 commercial development that is designed from the onset to offer core and flex commercial space. The Group’s first commercial development in central London, The Rowe, will also be completed within FY22.

Meanwhile the Singapore suburban retail portfolio, which has demonstrated sector resilience over the course of the pandemic, is well-positioned to benefit from Singapore’s decisive move towards an endemic environment. In particular, the resumption of atrium sales and lifting of safe management restrictions are expected to boost tenant sales and shopper traffic.

The pause in global travel gave the Group the opportunity to finish the work on enhancing Frasers Hospitality’s organisational structure. With geographical clustering and improved cost structures, the Group’s hospitality business can now be more responsive to changing market dynamics as the world progressively re-opens.

Through selective residential pipeline replenishment and a strong focus on markets with deep underlying demand, the Group was able to maintain steady progress in terms of project development sales and settlements of its residential projects in Australia, China, Singapore and Thailand. As at 31 March 2022, the Group’s residential pipeline is in excess of 18,000 units. Pre-sales from its projects, which reached S$2.4 billion at the end of 1H FY22, support the Group’s earnings visibility.

The Group is cognisant that, against a backdrop of rising geopolitical tensions as well as increasing inflation and interest rates, there remains significant headwinds ahead. The Group will maintain financial discipline and strengthen its capital structure, with a focus on green and sustainable financing, such as the Group’s first sustainability-linked loan and first green development loan secured in the UK in January and March 2022, respectively. In addition, the Group will build upon its foundation, recently strengthened with the addition of Soon Su Lin, as Chief Executive Officer for Frasers Property Singapore, to the leadership team, to enable Frasers Property to remain relevant and deliver value for years to come.

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