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Author: SGX   |   Latest post: Mon, 19 Jul 2021, 9:50 AM


REIT Watch - Retail and Office S-Reits Outperform Despite Tighter Covid-19 Measures

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REIT watch

ON May 16, Singapore announced tighter measures to combat the increased number of local Covid-19 cases. The four weeks of tightened measures left malls, eateries and offices quieter as the country defaulted to working from home and dining-in at F&B establishments were prohibited.

SGX lists 10 S-Reits with exposure to Singapore's office and/or retail segment. Despite lower footfall in the past four weeks (May 14 to June 10) due to Phase 2 (Heightened Alert) measures, these 10 S-Reits generated average total returns of 6.5 per cent, outperforming the 5.6 per cent average of the overall S-Reits sector and the Straits Times Index's 3.6 per cent total return.

Together, the 10 S-Reits received net inflows of S$43.9 million from institutional investors. Among them, the three highest recipients of institutional net inflows were CapitaLand Integrated Commercial Trust (CICT), Suntec Reit and Frasers Centrepoint Trust (FCT).

CICT, the largest S-Reit, is predominantly Singapore-focused and has a portfolio of 11 retail, eight office and five integrated development assets. Across its portfolio, the trust saw 30.7 per cent decline in shopper traffic (comparing periods of May 10 to 23 and April 26 to May 9) and return of office community fell to 15.0 per cent (in the week ended May 21).

To support retail tenants and shoppers, CICT provided rental waivers and operational support for retailers to continue online sales through CapitaLand's digital platforms and extended carpark grace periods. As at March 31, the trust maintains committed occupancy rates of 97.1 per cent and 94.8 per cent for its Singapore retail and office assets respectively.

Suntec Reit's S$11.7 billion portfolio includes retail and office assets in Singapore (four), Australia (five) and the United Kingdom (one).

The Reit believes that while hybrid working arrangements are likely to continue, physical offices will remain relevant as companies value the need to build corporate culture and foster employee collaboration.

Hence it expects revenue from its Singapore office assets to be stable, underpinned by strong rent reversions in the past 11 quarters.

Suntec City Mall, the Reit's largest income contributor, saw uneven retail recovery in Q12021, led by categories such as F&B, wellness, supermarket, homeware, kids' fashion and toys. As at March 31, the Reit maintains committed occupancy rates of 91.5 per cent and 96.1 per cent for its Singapore retail and office assets respectively.

FCT, a pure play on Singapore's suburban retail sector, has a current portfolio of 10 retail malls with total asset under management (AUM) of S$6.4 billion.

The trust noted that these suburban assets, which were among the first to benefit from recovery exiting the circuit breaker in June 2020, are predominantly at well-connected locations, with large catchment serving more than half of Singapore's population, and provides sustainable relevance to shoppers.

FCT maintains a portfolio occupancy rate of 96.1 per cent, as at March 31.

Waterway Point, in which FCT has a 40 per cent interest, announced the securing of its maiden S$589 million green loan in May, which will enjoy a reduction in margin on its second year, if Waterway Point retains its current Green Mark Gold Plus certification status issued by the Building and Construction Authority (BCA). 

REIT Watch is a weekly column on The Business Times, read the original version.

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