SPH Reit looking to acquisitions overseas

(From left) SPH Reit Management chairman Leong Horn Kee, chief executive of the Reit manager Susan Leng and SPH Reit directors Soon Tit Koon and Rachel Eng at yesterday's annual general meeting. Some 280 investors attended this year's meeting at SPH
(From left) SPH Reit Management chairman Leong Horn Kee, chief executive of the Reit manager Susan Leng and SPH Reit directors Soon Tit Koon and Rachel Eng at yesterday's annual general meeting. Some 280 investors attended this year's meeting at SPH News Centre.ST PHOTO: MARK CHEONG

Management has considered opportunities but is still awaiting the right asset to buy

SPH Reit told unit holders yesterday that it has been "aggressively and actively" looking at acquisition opportunities for two years but has yet to find suitable assets.

The remarks came after several unit holders noted that the Reit has not added any properties to its portfolio since its initial public offering in mid-2013.

It owns two malls: Paragon and The Clementi Mall

There were also remarks at the 90-minute annual general meeting that while the trust continues to pay stable and regular dividends, the unit price has risen only about 10 cents from its 90 cent listing price. It ended flat at $1.05 yesterday.

SPH Reit Management chairman Leong Horn Kee told the 280 or so investors at the meeting at SPH News Centre: "One of the countries we did explore is Australia, which is common. A lot of people are looking at Australia. Beyond that, we don't look at many. But we have not been able to find anything."

SPH Reit's investment mandate is for income-producing real estate used primarily for retail purposes in Asia Pacific.

Mr Leong highlighted that with cross-border transactions comes the need to acquire new domain knowledge on different property markets and how to manage "painful tax regimes".

 

The management has studied Australia as a market and "done its homework" but is still awaiting the right asset to acquire.

Chief executive of the Reit manager Susan Leng listed a country's infrastructure, tax, law, retail business environment, availability of local partners, and foreign exchange as criteria that it looks for in overseas assets.

Mr Leong addressed the issue of when The Seletar Mall, which is 70 per cent owned by the Reit sponsor Singapore Press Holdings (SPH) and 30 per cent by United Engineers, will be injected into the Reit. "This is also in our mind, but the owners are SPH... It is at their discretion and their partner who co-owns The Seletar Mall as to when they feel is the right time to sell."

Another unit holder asked if the Reit had made an offer for Jurong Point, which was sold earlier this year for $2.2 billion to Mercatus Co-operative.

Ms Leng said the mall was sold at a 4.2 per cent yield, adding: "If we had acquired that, it would be very dilutive to all the unit holders."

She noted that other firms can afford to bid more because they have business models and investment objectives that differ from Reits.

The absolute need to ensure yield accretion makes acquisitions difficult because sellers will always want to sell their assets at a high price.

It is a common problem faced by Reits, she said.

"It is definitely more challenging, but that doesn't mean we have not been working on it. Jurong Point is a good quality (asset). We looked at it very hard, but the sums just don't work out for us."

A version of this article appeared in the print edition of The Straits Times on December 01, 2017, with the headline 'SPH Reit looking to acquisitions overseas'. Print Edition | Subscribe