SPH Reit, a real estate investment trust sponsored by media group Singapore Press Holdings (SPH), is interested in adding The Seletar Mall to its portfolio, but time and price are two determining factors.
The Reit’s chairman Leong Horn Kee shared this on Friday in response to questions from shareholders who wondered if the Reit would purchase The Seletar Mall as it looked to grow the business. Currently, the Reit’s portfolio comprises Paragon and The Clementi Mall.
“Seletar Mall, we are interested. As the Board, we have a right to first refusal on it. The question is when is SPH prepared to sell it to us and at what price. . . Of course we’re a family in a way but (it) doesn’t mean we will get family price. If they get from us at family price of course I’m very happy. . . but if it’s not family price, we can wait.”
Dr Leong also said the Reit is always on the look out for accretive yield and is “exploring other options”.
Another key question raised during the 90-minute annual general meeting attended by 150 shareholders, was the rising threat of online shopping and e-commerce.
On this, Dr Leong said while the trend is getting more prominent, brick-and-mortar stores are still relevant and “sustaining themselves”, given that consumers still prefer to feel and look at the actual product before purchase.
“Food needs to be eaten real and not be eaten online,” he said to chuckles from the crowd.
Having said that, Dr Leong noted that the Reit is very mindful of the trend and has noticed that its retailers have started to modify their business models to suit online sales.
Of particular interest was the retention rate at The Clementi Mall, which was 50 per cent – lower than the 76 per cent at Paragon.
To this, Susan Leng, chief executive of SPH Reit, stressed that the Reit’s track record for occupancy has been 100 per cent since 2011 for The Clementi Mall and more than 10 years for Paragon. She added that this is because the Reit renews leases ahead of time.
In terms of renewal time frame, things are different for suburban and international tenants. International tenants typically need at least a year ahead because of their own process in Europe or in the US, while suburban tenants renew between six to eight months ahead, said Ms Leng.
In his opening remarks, Dr Leong made the point that the retail environment remains challenging amid the economic slowdown in Singapore and the uncertainties of the global environment.
“Consumers’ sentiment is muted. Retailers are also facing structural impediments such as labour constraints and competition from e-commerce,” said Dr Leong, adding that the Reit would continue to strengthen long-term sustainability of the properties.
SPH Reit’s aggregate distribution per unit (DPU) for the full year ended Aug 31, 2016, was 5.50 Singapore cents, up 0.5 per cent from the 5.47 cents reported last year.
Gross revenue was up 2.2 per cent year on year at S$209.6 million for the full year.
All resolutions raised were passed at the meeting.