THE distribution per unit (DPU) of Sasseur Real Estate Investment Trust : CRPU 0%(Sasseur Reit) fell by 7.2 per cent to S$0.01473 for its second quarter ended June, from S$0.01588 the year before.

Rental income under the Reit’s entrusted management agreement (EMA) model recorded a 0.5 per cent drop to S$29.5 million from S$29.7 million, excluding straight-line adjustments, mainly due to the weakening of the yuan against the Singapore dollar in 2023, said the Reit manager on Friday (Aug 11).

The Reit, which owns four outlet malls in China, recorded an 8.4 per cent rise in rental income to 155.4 million yuan in the second quarter amid China’s recovery.

The results bring distributable income to S$20.2 million, down 0.4 per cent from S$20.3 million in the corresponding period last year. The distribution will be paid out on Sep 26, after the record date on Sep 11.

The Reit’s portfolio average occupancy rate in Q2 reached a record high at 97.2 per cent, exceeding the pre-Covid level in FY2019, as well as the 96 per cent in the corresponding period last year.

This came on the back of new leases secured in its Kunming outlet mall, and a record high occupancy rate of 95.9 per cent in the Chongqing Bishan outlet mall after asset enhancement initiatives completed in 2022, the manager noted.

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Its weighted average lease expiry by net lettable area stood at 2.1 years as at Jun 30.

For the half year ended June, DPU was 2.6 per cent lower to S$0.03322 from S$0.0341 in the same period last year, after distributable income fell 2.4 per cent to S$43.9 million. The drop in distributable income was mainly due to the strong Singapore dollar against the yuan as well as higher finance costs led by higher interest expenses.

EMA rental income eased 1.4 per cent to S$62.6 million from S$63.5 million for the half year on the impact of foreign currency translation.

The yuan had depreciated 8.7 per cent against the Singapore dollar for H1 2023 as compared with the same period in 2022, the manager added.

Finance costs for the half year were 17.5 per cent higher at S$14.5 million, as the weighted average cost of borrowings rose 1.3 percentage points to 5.8 per cent, with higher interest rates on offshore loans.

As at the end of June, Sasseur Reit’s gearing stood at 26.2 per cent – below the regulatory limit of 50 per cent, compared with 27.6 per cent in the same period last year.

Meanwhile, the majority of the Reit’s loans are maturing in 2026. The manager also highlighted that about 77 per cent of the Reit’s total borrowings are hedged or pegged to fixed interest rates, with a weighted average debt to maturity of 3.3 years as at Jun 30.

While more than half of the Reit’s total loans are denominated in renminbi, the recent 10 basis point reduction of the five-year loan prime rate to 4.2 per cent per annum will help the mall owner to cushion its debt cost, according to the manager.

The stimulus measures to boost the Chinese economy will also benefit the Reit’s outlet malls, which are all located in high-growth cities.

Chairman of the Reit’s manager Vito Xu said that while they remain cautiously optimistic on the country’s economic outlook for the rest of the year, outlet malls can tap an emerging shift in Chinese consumers’ preferences towards value-for-money products during economic downturns.

“The outlet industry in China has shown counter-cyclical characteristics in the past and displayed greater resilience under weak or uncertain economic growth conditions.

“We are confident that consumer spending at outlets in China will remain robust in the second half of this year.”

Units of Sasseur Reit closed flat at S$0.725 on Friday.