CapitaLand Mall Trust preparing for upturn

Mr Tony Tan, chief executive of trust manager CapitaLand Mall Trust Management, said 30 per cent of the lease for the retail space at Funan has been committed, two years ahead of the mall's opening at the end of 2019.
Mr Tony Tan, chief executive of trust manager CapitaLand Mall Trust Management, said 30 per cent of the lease for the retail space at Funan has been committed, two years ahead of the mall's opening at the end of 2019.PHOTO: CAPITALAND

Review of tenant mix, property refurbishment where needed, as it posts fairly flat Q2 results

Amid challenging times in the retail sector, CapitaLand Mall Trust's (CMT's) manager is exploring ways to optimise operations across the malls in its portfolio, in anticipation of a pick-up in the economy.

They include reviewing the tenant mix for some malls, and undertaking property refurbishment where needed, the trust manager said yesterday, as it reported fairly flat second-quarter results.

"We are trying to prepare ourselves for the upturn... some of the malls are not operating at the most optimal level, so there are lots of opportunities for us to relook some of the plans," said Mr Tony Tan, chief executive of trust manager CapitaLand Mall Trust Management.

Its portfolio comprises 16 malls here, including Tampines Mall, Junction 8, IMM Building, Plaza Singapura and Bugis Junction.

CMT's revenue for the three months to June 30 fell by 1.3 per cent from a year ago to $168.6 million, largely owing to the redevelopment of the Funan DigitaLife Mall, which shut in July last year.

Mr Tan, who took on the role as chief executive in May, said 30 per cent of the lease for the retail space at Funan has been committed, two years ahead of the mall's opening at the end of 2019.

Plans are afoot to enhance the competitiveness of the malls in its portfolio. For instance, an upcoming cineplex near its Bedok Mall offers the potential for extended trading hours. Mr Tan also said popular hot pot restaurant Hai Di Lao will be opening soon at Bedok Mall.

  • AT A GLANCE

  • GROSS REVENUE:
    $168.6 million (-1.3%)

  • NET PROPERTY INCOME:
    $117.6 million (+1.2%)

  • DISTRIBUTION PER UNIT:
    2.75 cents (+0.4%)

"We will focus on getting the right tenants in; they may not necessarily be the highest rents, but it is more important to get our mall in a competitive position," Mr Tan told a briefing yesterday.

Among its assets, Bedok Mall posted one of the weakest rental reversions - which refers to the change in rents upon lease renewal - at negative 7.4 per cent in the first half ended June 30. It was negative 10 per cent at Westgate mall in Jurong East. The weaker rent growth in the two malls was partly due to bulk renewal of leases, CMT added.

Its portfolio occupancy rate was 98.6 per cent as at June 30, up marginally from 98.5 per cent at the end of December.

CMT posted a modest 0.4 per cent year-on-year rise in shopper traffic across its portfolio in the first half, although monthly tenants' sales per square foot were flat.

Mr Tan said CMT's recently refurbished Bukit Panjang Plaza took an immediate hit on shopper traffic and tenants' sales when a competing mall nearby, Hillion, opened in February. But it has recovered "two-thirds of the footfall".

Responding to a question on the prospects for the food and beverage (F&B) sector here in view of recent sales dips, Mr Tan said there may be too many of such offerings, resulting in stiffer competition.

"F&B lifespan has shortened... what I worry about is if an operator... goes on a high-speed expansion path, that could lead to a faster decline," he noted.

Despite the lower revenue, second-quarter net property income climbed by 1.2 per cent year on year to $117.6 million. That helped boost distribution per unit (DPU) for the quarter by 0.4 per cent year on year to 2.75 cents. This took DPU for the first half to 5.48 cents - 0.2 per cent higher than the same period last year.

Net property income for the first half fell by 2.6 per cent from a year ago to $237.6 million, while gross revenue slipped by 2.9 per cent to $340.7 million.

The retail sector here continues to face challenges, including competition from e-commerce, and subdued consumer sentiment owing to slower economic growth.

"It is a patchy kind of outlook. I won't proclaim today that the consumers are back, but I think things have stabilised a little bit," Mr Tan said. The counter closed three cents higher at $2.03 yesterday after the earnings were announced.

A version of this article appeared in the print edition of The Straits Times on July 22, 2017, with the headline 'CapitaLand Mall Trust preparing for upturn'. Print Edition | Subscribe