The manager of Sasseur REIT has reported a distribution per unit (DPU) of 1.588 cents for the 2QFY2022 ended June, 1.6% lower y-o-y.
This brings the REIT’s 1HFY2022 DPU to 3.410 cents, up by 1.1% y-o-y and the highest first half DPU in four years.
The lower 2QFY2022 DPU was due to the 6.5% y-o-y decline in distributable income of $20.3 million mainly due to the impact of Covid-19 lockdowns in China from mid-March to mid-May.
Restrictions on intercity travels have weighed on consumer sentiments, leading to lower y-o-y shopper traffic and sales in 2QFY2022 at Sasseur REIT’s outlets, with the exception of the Chongqing Bishan Outlet which enjoyed stronger occupancy and sales during the quarter. Chongqing Bishan Outlet saw the completion of its asset enhancement works in March.
In the 1HFY2022, total outlet sales fell by 7.7% y-o-y to RMB155.1 million ($31.5 million) as sales weakened on the back of the Covid-19 outbreaks across certain cities in China.
During the 2QFY2022, the REIT’s entrusted manager agreement (EMA) rental income fell by 1.6% y-o-y to RMB143.4 million due to a 13.9% y-o-y decline in the variable component, in line with a 12.9% y-o-y fall in outlet sales during the same quarter.
EMA rental income for the 1HFY2022 fell by 0.5% y-o-y to RMB301.8 million.
“Sasseur REIT has performed commendably in the first half of 2022, proving the robustness of its business model, despite a seasonally subdued quarter and ripple effects of the widespread lockdowns on our outlets’ sales,” says Cecilia Tan, CEO of the manager.
“A key driver for the results was our proactive asset management efforts to optimise the tenant mix at the outlets, strengthen our retail and lifestyle offerings as well as implement targeted asset enhancement works. In the second quarter of 2022, the REIT’s portfolio occupancy rate has already reverted to its pre-Covid level in FY2019, against the backdrop of a slowing economy,” she adds.
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She continues: “As we move into the second half of this year with the peak retail season coming up, we will continue to roll out interactive and exciting thematic events to engage shoppers and ramp up sales. On the debt refinancing front, we remain focused on completing the exercise within the year, ahead of March 2023 maturity.”
As at June 30, Sasseur REIT’s portfolio average occupancy rose 0.6 percentage points q-o-q to 96.0%.
About 92.6% of the remaining leases (by gross revenue) expiring in FY2022 has been pre-committed as at June 30.
The REIT’s aggregate leverage remained low at 26.5%, with a healthy interest coverage ratio of 5.0 times.
“We are encouraged that our outlets have seen some year-on-year rebound in sales in June 2022, compared to the year-on-year declines in April and May, amidst easing pandemic restrictions and macroeconomic policy support. This trend is in line with the country’s retail sales of consumer goods which have seen a similar rebound during the same month,” says Vito Xu, chairman of the manager.
“While there may be some short-term impact from the Covid-19 situation in the country, the long-term growth potential of the economy remains intact. The government is taking strong steps to boost domestic consumption as a key driver for the economy and Sasseur REIT’s outlets are well-positioned to leverage this structural growth trend, as the middle-income population steadily grows over time,” he adds.
Unitholders will receive their distributions on Sept 27.
As at 9.03am, units in Sasseur REIT are trading 0.5 cent higher or 0.64% up at 79 cents.
