Sasseur REIT CRPU has reported a distribution per unit (DPU) of 3.14 cents for the 2HFY2022 ended Dec 31, 2022, 15.8% lower than the DPU of 3.731 cents in the same period the year before.
The REIT’s DPU for the FY2022 came to 6.55 cents, 7.8% lower than FY2021’s DPU of 7.104 cents.
DPU for the 4QFY2022 stood at 1.302 cents, 31.5% lower y-o-y, as distributable income (before the retention of $3.9 million) fell by 21.2% y-o-y to $19.9 million. This was mainly due to the effect of Covid-19 outbreaks in China during the period, which led to mandated temporary closures and shorter operating hours in the REIT’s malls.
The distributable income for the 2HFY2022 fell by 10.5% y-o-y to $43.4 million, and this is before its retained amount of $4.8 million. The amount was retained to fund the transaction costs of refinancing and for working capital purposes.
During the 2HFY2022, the REIT’s entrusted manager agreement (EMA) rental income fell by 5.1% y-o-y to RMB292.9 million ($57.1 million)
Under EMA rental income, fixed component increased by 3.0% y-o-y to RMB217.2 million.
Variable component fell by 22.7% y-o-y to RMB75.7 million, which is in line with the 22.9% y-o-y drop in total outlet sales for the period fell by 22.9% y-o-y. The drop was attributable to the series of temporary closures due to Covid-19 during the period.
In Singapore dollar (SGD) terms, EMA rental income (excluding straight-line adjustments) fell by 11.1% y-o-y to $57.8 million due to the stronger SGD.
In the FY2022, EMA rental income fell by 2.8% y-o-y to RMB594.7 million, cushioned by the 3.0% y-o-y growth in fixed component of RMB434.5 million.
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Variable component under EMA rental income for the FY2022 fell by 15.7% y-o-y to RMB434.5 million.
In SGD terms, EMA rental income fell by 15.7% y-o-y to $160.2 million.
As at Dec 31, 2022, the REIT’s portfolio average occupancy rate rose to 97.2%, which is a record high since the REIT’s IPO. This was contributed mainly by the REIT’s Hefei outlets due to new leases secured and adjustments to tenant mix, as well as stable occupancies at both Chongqing Liangjiang Outlets and Kunming Outlets, when compared against third quarter 2022.
Its weighted average lease expiry (WALE) stood at 2.6 years by net lettable area (NLA).
The REIT’s aggregate leverage increased by 1.5 percentage points to 27.6% as at Dec 31, 2022. Its interest coverage ratio stood lower at 4.4x for the period, down by 5.1x as at Dec 31, 2021.
Cash and cash equivalents as at Dec 31, 2022, stood at $90.8 million.
“Sasseur REIT’s results demonstrate its resilience and the strength of its EMA business model throughout a year marked by Covid-related volatilities in China and macroeconomic challenges. The valuation of the REIT’s portfolio has stayed relatively unchanged as at end-2022 from a year ago, reflecting the strong underlying fundamentals of the outlets which are poised to benefit from the consumption-led recovery in 2023,” says Cecilia Tan, CEO of the REIT manager.
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“Despite the difficult operating environment in 2022, we managed to successfully secure new loan facilities with different tenors to refinance the REIT’s loans due in March this year. This is a significant milestone in our efforts to de-risk the REIT’s debt profile over time. Furthermore, Kunming Outlets will be unencumbered post refinancing, presenting us with opportunities to optimise the REIT’s debt capacity as we gear up for the REIT’s next growth phase,” she adds.
Further to her statement, Tan notes that the REIT manager is “upbeat” about its operating outlook this year with China moving away from its zero-Covid-19 policy.
“The re-opening of China’s economy is expected to spur economic activities towards normalisation in 2023. With an anticipated rebound in consumption demand, we are hopeful of sustainable stronger sales momentum through well-curated promotional campaigns, maintaining optimal occupancy levels and deploying yield-enhancing asset strategies. On the capital management front, we will explore the feasibility of tapping capital from new sources to enhance Sasseur REIT’s access to a broader capital pool and further strengthen the REIT’s balance sheet,” she says.
“The re-opening of China’s economy and policymakers’ pledge to prioritise domestic consumption and raise personal incomes bode well for the country’s consumption outlook,” says Vito Xu, chairman of the REIT manager.
“Already, we are seeing visible signs of recovery in the retail industry in January 2023, fuelled by pent-up consumer demand. With the improvement in consumer sentiments, many Chinese cities have raised their growth targets in 2023. In particular, Chongqing and Hefei cities expect growth to hit at least 6% and 6.5% respectively this year,” he adds. “Given the outlet sector’s attractive value propositions as well as the country’s growing middle-class population segment, we believe Sasseur REIT’s outlets are well-positioned to benefit from the government’s focus to promote a consumption recovery as a major driver of China’s economic growth in 2023.”
Units in Sasseur REIT closed 1 cent higher or 1.23% up at 82.5 cents on Feb 17.
