The rating remains on review for possible downgrade.

‘The downgrade reflects Moody’s views that FCT is unlikely to grow in the next two years to a scale and diversity that is consistent with its previous rating’, says Kathleen Lee, Moody’s lead analyst for the trust.

‘Consequently, FCT’s relatively small size and asset concentration risk whereby Causeway Point contributes a significant 71% of net profit from its portfolio of 3 retail assets do not support a continuation of its previous rating when compared to similarly rated peers in the REITsector’, adds Lee.

The rating remains on review for downgrade given the use of uncommitted drawn banking facilities to fund capital expenditure. While the amount is relatively small – and with banks with good relationships with FCT — Moody’s believes the continued use of such facilities is a source of weakness especially as the bank lending environment continues to tighten.

Moody’s notes that FCT has reported sustainable income streams, supported by its good quality, well-located and seasoned suburban retail malls which enjoys relatively high entry barriers and is more resilient to economic downturns as tenants mainly provide daily necessities.

The rating review will focus on FCT’s plans to secure committed bank facilities or find alternate mitigating measures to address the weakness of the existing uncommitted facilities and to fund ongoing capital expenditure.

The last rating action was on 20 October, 2008 when the ratings of FCT were placed under review for possible downgrade.

FCT is a Singapore-based real estate investment trust with particular focus on retail properties in Singapore. The trust is sponsored by Frasers Centrepoint Ltd, the wholly owned property arm of F&N group, one of Singapore’s leading shopping centre operators and developers.