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3 Factors Why CapitaMall Trust Is Leading Singapore’s Retail Arena
Corporate Digest | 06 August 2014
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By: Ong Qiuying
Articles (131) Profile

The first real estate investment trust (REIT) listed on the Singapore Exchange in July 2002, CapitaMall Trust (CMT) is also the largest REIT by market capitalisation and asset size in Singapore. CMT holds a portfolio of 16 quality shopping malls as well as 122.7 million units in CapitaRetail China Trust, with its total assets amounting to $10 billion as at 31 December 2013.

Recently, CMT turned in a strong report card for the second quarter ending 30 June 2014, announcing a 6.5 percent year-on-year increase in distributable income to $93.4 million, translating to a distribution per unit (DPU) of $0.0269.

For the half year period, gross revenue increased 4.1 percent to $329 million while net property income expanded 4.9 percent to $228.3 million. In tandem, distributable income to unitholders rose 5.5 percent to $182.5 million.

In fact, CMT is looking up as an attractive investment as it has maintained a tight yield around 4 to 5 percent since FY09 as DPU continued to record healthy growth along with capital gains.

Table 1: CMT’s DPU & Yield

Source: Company Reports

However, the Singapore retail arena has been evolving with an influx of multiple new malls and the rising trend of online shopping. Many shopping malls are starting to reflect declining shopper traffic and tenant sales per square foot.

Notably, the Singapore Department of Statistics reported that the retail sales index (excluding motor vehicle sales) decreased 1.4 percent in April 2014. Compounding the trend, total retail sales value in May 2014 was 6.1 percent lower at $3.1 billion. Excluding motor vehicles, retail sales for May was only up marginally by 0.1 percent.

Interestingly, CMT has been able to stay ahead of the game. Here are three reasons why CMT is still leading in the changing retail landscape of Singapore:

Differentiation Is Key
In its 1Q14 report, Knight Frank highlighted that the competitive retail arena would drive the retail malls towards differentiation, providing higher diversity within various target markets. Recently-opened malls such as Orchard Gateway tend to attract niche fashion stores while One KM in Paya Lebar is positioned as a destination for lifestyle and knowledge catering to families.

CMT’s portfolio of malls is strategically located in the suburban areas and downtown core of Singapore. The diversification extends from not only catering to upscale markets but also neighbourhood communities and even specific target segments.

Looking into its portfolio, CMT has been actively positioning its properties in various segments through active asset management and targeted tenant mix. For example, malls like the IMM Building has been refurbished and positioned as Singapore’s largest outlet mall with 55 outlet stores and on-going efforts to increase more. The Clarke Quay strip has also been positioned as the famous nightspot along Singapore River.

Targeting the young and trendy, CMT has JCube and Bugis Junction, where JCube features Singapore’s only Olympic-size skating rink and other entertainment stores while Bugis Junction is home to a variety of specialty stores. Closer to the heartlands, CMT’s malls also holds a bulk of tenants in the necessities space to meet the daily needs of shoppers.

The active positioning of its malls has helped CMT maintain resilience as it continues to attract target crowds.

Interesting Developments
2014 will see some exciting developments in three of CMT’s assets.

"J.Avenue" at JCube features street shopping ambience targeting the young and trendy

JCube is reconfiguring level two of about 25,000 square foot into a new “J.Avenue” zone featuring street shopping ambience. About two-thirds of the 70 units have been committed and the space will be filled progressively from September 2014.

Particularly, J.Avenue will also allow tenants on short leases ranging from three to six months, encouraging the entrepreneurial spirit of aspiring owners to set up their first business. While it brings volatility to its rental and occupancy issues, this ensures continuity of refreshing new stores to entice shoppers.

Tampines Mall will also undergo a $36 million transformation commencing this year, converting its roof area into new leasable space to house enrichment schools and educational tenants as well as another $29.2 million facelift. The initiative, excluding rejuvenation works, would bring in a return on investment (ROI) of 8 percent.

The latest asset enhancement initiatives (AEI) planned is for Bukit Panjang Plaza, for an $18.5 million expansion of community space to free up approximately 18,000 square foot of commercial gross floor area as well as a $14.2 million fresh façade. Excluding rejuvenation works, this AEI is also expecting an 8 percent ROI.

CMT is also actively continuing the next phases of enhancement in the IMM Building and Bugis Junction.

Track Record
Significantly, CMT has been successful in delivery of results as seen from its track record. CMT’s AEIs for JCube, The Atrium@Orchard, Clarke Quay and Bugis+ are also testimony to its track record. In FY13, following the completion of the AEIs, the group registered an 84.4 precent improvement in net property income from $55.9 million to $103.1 million for these four properties.

Furthermore, with the effective AEIs, CMT has also been able to maintain a healthy rental reversion consistently. MayBank Kim Eng noted that CMT has achieved positive reversions of 2.3 to 13.5 percent since 2003. Even during the global financial crisis period in 2009, CMT produced a 2.3 percent uplift and maintained an average of 6 percent in the subsequent four years.

SI Research Takeaway
In all, with one of the largest retail portfolio in Singapore, CMT is looking to take the lead in differentiating and positioning its malls further to cater to the needs of various target consumer segment. This move is definitely going to provide a competitive edge, especially in the face of changing consumer habits.

Qiuying oversees the construction and real estate investment trusts sectors at Shares Investment.

Please click here for more information about this author.

CapitaLand Mall Trust  2.630 -0.04 -1.50%   
Business: Co owns and invests in quality income-producing assets which are used, or predominantly used, for retail purposes primarily in Singapore.

Insight: Apr-19, 1Q19 gross revenue and NPI rose 10% and 11... Read More
CapitaLand Retail China Trust  1.550 +0.010 +0.65%   
Business: Co is a real estate investment trust with a portfolio of retail real estate across China.

Insight: Apr-19, 1Q19 gross revenue increased 1.1% in SGD t... Read More

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