'Resilient' suburban retail malls lift FCT's tenants' sales above pre-Covid levels
EVOLVING shopping trends amid the pandemic has lifted sales by tenants at Frasers Centrepoint Trust's (FCT) J69U portfolio of suburban retail malls to above pre-Covid levels in its first quarter ended December.
Portfolio tenants' sales rose 2 percentage points to draw level with pre-Covid levels in October 2021, before edging 1 per cent higher in November. With the relaxation of Covid-19 measures in Singapore in December, tenants' sales rose 6 per cent above 2019 levels.
However, as at December 2021, shopper traffic at its malls were still just two-thirds of pre-Covid levels.
"Especially in the month of December, we do see improvement year on year," said Richard Ng, chief executive officer of the real estate investment trust (Reit) manager, in a briefing on Wednesday (Jan 26) following its Q1 business update.
One of the reasons tenants' sales has increased faster than shopper traffic, he explained, is because of a shift towards more purposeful visits to the malls.
"(Pre-Covid), you have a lot of traffic, a lot of people going to the mall all the time, but not 100 per cent of them may be shopping or may be spending the same amount of money," Ng said. "Now we have more measured traffic (but) you can see that people are going to the mall more purposefully. They go there, they either eat (or) they go there to shop. They have something in mind, and they go there and do it."
"They may go less frequently, but each time they go, they may be buying more," he added. "The other thing is... our malls provide essential services - your groceries, your food, your health and wellness services, the tuition centres - so that is the reason why our sales continue to hold up despite a drop in shopper traffic."
The raising of the capacity limit for dining in at food establishments to 5 individuals towards the end of 2021 also provided a boost to FCT's food and beverage (F&B) tenants.
The F&B sector accounted for 37.5 per cent of the Reit's gross rental income as at Dec 31, 2021.
However, Ng pointed out that some F&B tenants are doing better because they have adapted to the restrictions.
"In the past, the F&B operators depended mainly on physical sit-downs. So you could have 1 turn, 2 turns, maybe maximum 3 turns during lunch or dinner. But today it's different because there are various platforms - you could do delivery, you could do click-and-collect," Ng said. "You've seen even some of the hotpot guys during the restriction, they started to offer bento sets. They change, they adapt, and they recognise that they need to expand their business beyond just the physical boundary space."
"We see that as a big plus because the space becomes more productive, the retailers are more sustainable, they generate better revenue. We also benefit from the additional sales that go into the online platform," he added. "Our consumers benefit because now they can choose - whether they want to sit down, or if it's full, they can just take away, or they can actually order and have it delivered. So it's a win-win-win for all."
FCT after market close on Jan 25 reported that committed occupancy for the retail portfolio was stable at 97.2 per cent in Q1 FY2022 ended December.
The Reit manager said the trust showed a "resilient performance" in Q1 despite the continuing impact from the Covid-19 pandemic, with demand for retail spaces within FCT's well-located and dominant suburban retail malls remaining healthy.
Looking forward, Ng said the Reit manager is starting to turn its attention to retaining sustainable tenants that are doing well, as well as attracting new brand names to give "a new flavour" to the malls.
Meanwhile, the Reit manager said it remains on the lookout for "opportunistic" acquisitions.
"We are looking in the market (and) our teams are having conversations with owners of malls across Singapore. That is something that we continue to cast our eye on," Ng said.
Responding to a question on whether FCT would be interested in acquiring the south wing of Northpoint City mall, Ng said that it was "a question of when (sponsor) Frasers Property intends to sell the asset".
"It definitely makes a lot of sense for us to have that asset as well because we already own the north wing," he added.
As at end-December, FCT's gearing level stood at 34.5 per cent, with interest cover at 5.81 times and average debt maturity at 2.28 years. The trust said the current gearing level provides ample debt headroom to support growth.
"We are ready because our headroom is there, we have reconstituted our assets to make sure that we can take in assets and strengthen our portfolio. From that perspective, we're always looking out for opportunities," Ng said.
