CapitaLand Retail China Trust malls see 42.5% fall in sales, 37.6% drop in footfall for Q1

THE Covid-19 outbreak in China has caused a plunge in first-quarter sales for tenants of malls under CapitaLand Retail China Trust (CRCT), with sales dropping 42.5 per cent year on year.

The China mall real estate investment trust's (Reit) manager said in a business update early on Thursday that total shopper traffic at its malls for Q1 also fell 37.6 per cent compared to a year ago.

All the Reit's malls had reopened by April 2, with most resuming normal operating hours. About 90 per cent of stores in these malls had reopened as at April 19.

CRCT's portfolio occupancy rate is currently 95.4 per cent. Over 1,000 leases, representing about 30 per cent of the Reit's gross rental income, are up for renewal this year. Of these, 60 per cent of leases are up for renewal in the second half of 2020.

The Reit's manager said it was "cautiously optimistic" about its performance for the seond half of the year on the back of pro-business government stimulus measures. These include tax cuts and subsidies, lower borrowing costs for businesses, and cheaper electricity, gas, and sewage treatment costs.

China also launched a nationwide campaign last month to encourage citizens to resume consumption.

The Reit's manager said a "healthy flow" of shoppers were returning to its malls, with shopper traffic doubling from February to March, and tenants' sales rising 189 per cent in the same period.

It is working to attract more shoppers with initiatives, such as livestreams of tenants' stores on the malls' official social media accounts, and partnerships with retailers to launch group buying campaigns on the malls' WeChat pages.

Cost-containment measures the Reit's manager has implemented include postponing non-essential capital expenditure, reducing general and administrative expenses, and optimising utilities consumption, property maintenance and marketing expenses.

Fit-out works have resumed for CRCT's newest mall, Yuquan Mall, which is targeted to open by the end of the year. These works were initally targeted to be completed by Q1.

The Reit's manager has also received pre-termination compensation from the master leasee of CapitaMall Erqi and is receiving progressive payments. The mall is targeted for divestment by the third quarter of this year.

It added that it had no refinancing concerns, with no long-term debt maturing until 2021. It had earlier refinanced S$150 million of term loans due in 2020 to 2026, and holds S$237.1 million in undrawn uncommitted debt facilities.

Units of CRCT were trading at S$1.26 as at 9.01am on Thursday after the announcement, up S$0.01 or 0.8 per cent.