SPH Reit posts lower H2 DPU on rent waivers, capital retention

Singapore

SPH Reit on Tuesday evening said it posted a distribution per unit (DPU) of 1.04 Singapore cents for the half-year period ended Aug 31, 2020, compared to 2.85 cents paid out in the corresponding period a year ago.

This was on the back of a 79.4 per cent drop in income available for distribution to S$14.9 million, from S$72.2 million a year ago, as the Reit manager decided to defer the payment of some S$14.5 million, as allowed under Covid-19 relief measures announced by the Inland Revenue Authority of Singapore.

This was "for prudence in financial management", it said. Another S$15 million of capital allowance was also used to provide for capital expenditure and other working capital needs.

Revenue for the six months fell 7.4 per cent to S$108.1 million, and net property income declined 14.9 per cent to S$78.4 million, mainly due to S$31.8 million in rental waivers and reliefs granted by the landlord to its tenants in Singapore to help them cope with the effects of the pandemic.

The full-year result was better, with a 5.6 per cent increase in gross revenue to S$241.5 million, thanks to the Reit's acquisition of a 50-per-cent interest in luxury mall Westfield Marion in December 2019, which contributed S$37.5 million for three quarters, and suburban mall Figtree Grove which was acquired in December 2018 and registered its first full-year contribution of S$15.9 million.

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Westfield Marion in Adelaide and Figtree Grove in Wollongong, New South Wales, also contributed S$26.3 million and S$12.5 million to net property income for FY20, respectively.

For the full year, the Reit reported a 1.2 per cent improvement in net property income to S$181.9 million.

SPH Reit's Australia assets, though not spared the effects of Covid-19, were relatively less impacted. An allowance for rent relief of S$8.1 million was provided in FY20 to support eligible tenants affected by Covid-19, the manager said.

Full-year income available for distribution fell 36.4 per cent to S$92.2 million.

At the briefing, when asked if its Singapore assets - Paragon, The Clementi Mall and The Rail Mall - are facing any exits of fashion brands at a time when brands such as Esprit, Topshop and Topman are leaving Singapore, Susan Leng, CEO of SPH Reit, said that the international brands among its tenants are still "holding strong to their own market positioning, albeit their sales have been impacted".

"Going forward with the uncertainty of Covid-19, there is really no certainty for any businesses," she said, adding that pre-Covid, there have already been casualties of e-commerce, and Covid-19 has exacerbated the situation for some of them. Many of the discretionary fashion brands among its tenants, which are more susceptible to the threat of online shopping, have been counteracting falling store sales by doing more online sales.

Contractually, sales done online do not count towards the gross turnover component of their rent as they had traditionally made up very small percentages of 6 to 8 per cent pre-Covid, but going forward, the Reit manager will have to "review how this can best work out for both parties", she said.

For its future acquisition pipeline, one property that it has rights of first refusal (ROFR) to, The Seletar Mall, remains subject to the Singapore Press Holdings (SPH) board's decision on whether and when to dispose of it. The second asset it has ROFR to is the Woodleigh Mall, the retail portion of the integrated development that SPH and Kajima Development are developing in Bidadari, which is facing construction delays. The timeline for its completion is unclear.

Units of SPH Reit on Tuesday added half a cent or 0.57 per cent to S$0.885.