Sasseur Reit posts 1.6% dip in Q2 DPU on Covid-19 impact in China

OUTLET mall-focused Sasseur Reit on Friday (Aug 12) posted a 1.6 per cent fall in distribution per unit (DPU) to 1.588 Singapore cents in Q2 ended June, as Covid-19 lockdowns in China hit retail sales.

Rental income under Entrusted Management Agreement (EMA) was down 1.6 per cent to 143.4 million yuan (S$29.1 million), while distributable income fell 6.5 per cent to S$20.3 million. This came as several major Chinese cities saw widespread Covid-19 lockdowns between March and May, weighing on shopper traffic at the real estate investment trust’s (Reit) outlets.

However, the Chongqing Bishan Outlet was an exception, enjoying stronger occupancy and sales following the completion of asset enhancement works in March, the Reit’s manager said.

Sasseur Reit’s overall H1 performance was more upbeat, with DPU rising 1.1 per cent to 3.41 Singapore cents. This is Sasseur Reit’s highest H1 DPU in 4 years. EMA rental income for the half-year dipped 0.5 per cent to 301.8 million yuan.

Portfolio occupancy also improved across the Reit’s 4 properties to 96 per cent in Q2, up from 95.4 per cent in Q1. This marks a return to pre-Covid levels, when occupancy was 96 per cent in FY2019.

Vito Xu, chairman of the Reit manager, is encouraged by the rebound. “While there may be some short-term impact from the Covid-19 situation in the country, the long-term growth potential of the economy remains intact.

“The government is taking strong steps to boost domestic consumption as a key driver for the economy and Sasseur Reit’s outlets are well-positioned to leverage this structural growth trend, as the middle-income population steadily grows over time,” said Xu.

As at end-June, some 92.6 per cent of the Reit’s remaining leases expiring in FY2022, by gross revenue, have been pre-committed. The Reit’s aggregate leverage stood at 26.5 per cent, with an interest coverage ratio of 5 times. This indicates a “sizeable” debt headroom for potential acquisitions, the Reit manager said.

Sasseur Reit has onshore and offshore debt of S$510.9 million maturing in March 2023, and is working on a deal with several regional banks. It expects its debt refinancing to be completed by end-2022, and the manager hopes to stagger debt maturities and loan amounts, de-risking the debt profile.

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The Reit was trading at S$0.785 as at 9.42 am, down 0.6 per cent or S$0.005.