Frasers Group JV Buys Half-Stake in Mercatus Singapore Mall for $497M

The manager of Frasers Centrepoint Trust and its sponsor, Singapore-listed property developer Frasers Property, have teamed up to acquire a 50 percent stake in the largest mall in northeast Singapore from Mercatus Co-operative Ltd for S$652.5 million ($497 million).

FCT’s manager and Frasers Property entered into a share purchase agreement with Mercatus, the real estate investment arm of NTUC Enterprise Co-operative, on Thursday to buy the half stake in an entity which owns the NEX shopping centre in suburban Serangoon district, according to an SGX filing later that day.

“NEX is a complementary fit to FCT’s existing suburban retail property portfolio,” Richard Ng, chief executive officer of the trust’s manager. “This acquisition will further enhance FCT’s portfolio diversification and strengthen its performance.”

Divesting its stake in NEX will leave Mercatus with one remaining retail asset in its S$5.2 billion portfolio as the NTUC unit continues to divest its real estate portfolio, with the latest sale coming roughly a month after it entered into a S$2.16 billion deal with Hong Kong’s Link REIT for the sale of the Jurong Point mall and Swing By @ Thomson Plaza.

Price Slashed

The joint venture, in which FCT has a 51 percent interest with its sponsor holding the remaining 49 percent, is paying around S$3,274 per square foot for the mall’s 634,631 square feet (58,960 square metres) of net lettable area. The deal values the retail asset at S$2.08 billion and is expected to generate a yield of 4 percent on a net property income basis.

Following completion of the transaction, FCT and Frasers Property will respectively hold 25.5 percent and 24.5 percent stakes in NEX, with the remaining 50 percent stake by Chinese sovereign wealth fund CIC and PIM Foreign Investments, which is a subsidiary of US giant Prudential Financial. Prudential’s PGIM Real Estate affiliate serves as asset manager for the property.

A Business Times account at the time that Mercatus acquired its stake from Pramerica Real Estate Investors (now PGIM Real Estate) in 2012 reported that the holding  was valued at S$825 million. With the value of NEX in 2012 on a gross asset value reported at S$1.65 billion in 2012, the agreed property value of S$2.08 billion for this latest transaction represents an increase of around 26 percent, a Mercatus representative pointed out.

Located at 23 Serangoon Central, the seven-storey mall houses 332 stores and is integrated with the Serangoon Bus Interchange and the Serangoon MRT Station, where the North-East Line and the Circle Line intersect.

Nearly fully occupied as of end-November, the mall’s key tenants include NTUC-linked grocery retailer FairPrice Xtra, department store Isetan, food court operator Food Junction and fast fashion brand H&M. The buyers plan to finance their acquisition through a mix of debt and cash.

Frasers Likes the Suburbs

“Retail is one of the five asset classes in Frasers Property’s multinational portfolio,” said Soon Su Lin, CEO of Frasers Property Singapore. “This investment in NEX further strengthens our focus in the suburban retail segment where we already have an established platform and strong capabilities.”

Chaired by Thai billionaire Charoen Sirivadhanabhakdi, Frasers Property had earlier been reported as one of the three final contenders for Mercatus’ S$4 billion mall portfolio alongside Link REIT, and CapitaLand Integrated Commercial Trust.

During 2019 Frasers Property, together with FCT, had expanded their bets on Singapore’s community retail market by spending over S$990 million to acquire a combined 67 percent stake in a PGIM fund holding a portfolios of malls in the city-state’s suburban districts.

NTUC Reconfigures

NEX was included in the four assets that Mercatus had put on the market when it began marketing its portfolio in the middle of last year.

After Link REIT purchased the Jurong Point mall in western Singapore and Swing By @ Thomson Plaza last month, only the 320,000 square foot AMK Hub property in Ang Mo Kio will remain in the Mercatus portfolio, with Link REIT having agreed to manage that property for the next decade as part of its deal with Mercatus.

The NTUC unit also still owns the 31-storey One Marina Boulevard skyscraper in Singapore’s downtown core, which serves as headquarters both for Mercatus and for its parent firm.

January has been a busy time for NTUC, with units and affiliates of the trade union-based organisation having played leading roles in three real estate deals during the first month of 2023.

Last week, NTUC-affiliated Singapore Maritime Officers’ Union paid S$62.5 million for a block of shophouses at 322-332 Serangoon Road near Farrer Park MRT Station. Earlier in January, the group’s Income Insurance division, announced that it has appointed CBRE Investment Management to manage its $3 billion real estate portfolio, which spans Asia Pacific and North America, as well as the Europe, Middle East and Africa region.

Note: an earlier version of this story indicated that this latest transaction is taking place at a discount to the value of the property in 2012. That analysis was based on a comparison of gross asset value and net asset value. The story has been updated to clarify the valuation and Mingtiandi regrets any misunderstanding.