SPH Reit keeps Q2 DPU unchanged at 1.4 cents

Net property income dips 1.1% on lower revenue from Paragon mall

SPH Reit has declared a distribution per unit (DPU) of 1.4 cents for the second quarter ended Feb 28, unchanged from a year ago.

Its net property income for the quarter slipped 1.1 per cent from a year ago to $42.3 million, due mainly to lower revenue from Paragon shopping mall.

Gross revenue dipped 0.8 per cent year on year to $53.59 million during the period.

Negative rental reversions - which means lower average rents for renewed and new lease terms compared with those of preceding lease terms - were registered in the two retail malls owned by the Reit.

Paragon recorded a negative rental reversion of 7.1 per cent for new and renewed leases in the first half of fiscal 2018, mainly due to negotiations during the retail sales downturn since 2014.

At The Clementi Mall, there were only three changes in tenancies, representing 1.4 per cent of the mall's net lettable area, which led to a 2.5 per cent negative rental reversion.

The overall portfolio rental reversion, computed based on the weighted average of all expiring leases, was a negative 7.1 per cent.

  • AT A GLANCE

  • Gross revenue

    $53.6 million (-0.8%)

  • Net property income

    $42.3 million (-1.1%)

  • Distribution per unit

    1.4 cents (unchanged)

But the Reit manager said tenant sales in the malls have grown, in tandem with the recent recovery in retail sales since last June. Both properties also continued their track record of full occupancy.

"In keeping with our philosophy of treating tenants as business partners, we will work closely with them to ride through both cyclical and structural challenges in the retail environment," said SPH Reit Management chief executive Susan Leng.

She added: "The tourist arrivals and spend for 2017 ended on a positive note and we believe Paragon would stand to benefit with this trend. The forecasted GDP (gross domestic product) growth of 1.5 to 3.5 per cent bodes well for Singaporeans, and The Clementi Mall is well-poised in the suburban to continue to serve its immediate catchment."

The Reit manager said it also maintained a well-staggered debt maturity profile without a major concentration of debts maturing in a single year, and strikes a balance between fixed and floating interest rates to optimise borrowing cost while managing exposure to interest rate fluctuations.

The loan tranche of $135 million that matured last month was refinanced as a four-year loan. The average term to maturity increased to 2.2 years after the renewal.

The DPU will be paid out on May 16. Units of SPH Reit closed 0.5 per cent higher at $1 yesterday.

A version of this article appeared in the print edition of The Straits Times on April 07, 2018, with the headline 'SPH Reit keeps Q2 DPU unchanged at 1.4 cents'. Print Edition | Subscribe