Dasin Retail a play on China's fast-growing Greater Bay Area

Candace Li
Candace Li7/24/2020 06:30 AM GMT+08  • 6 min read
Dasin Retail a play on China's fast-growing Greater Bay Area
How has Dasin Retail Trust’s portfolio evolved since IPO till date?
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1. How has Dasin Retail Trust’s portfolio evolved since IPO till date?

Dasin Retail Trust’s mandate is to invest in, own or develop in Greater China income-producing real estate used primarily for retail purposes and real estate-related assets, with a focus on retail malls. As at July, its portfolio comprises seven retail malls in Greater China, valued at about RMB12.1 billion ($2.4 billion).

We have expanded our portfolio by actively implementing our investment growth strategies. The valuation of our portfolio has expanded by nearly three times within three years of IPO.

In September 2019, we made the trust’s maiden acquisition, Doumen Metro Mall in Zhuhai City, since our listing in 2017. In July, we completed the acquisition of Shunde and Tanbei Metro Malls.

2. Describe the tenant mix for Dasin Retail Trust’s portfolio of assets.

We optimised our trade mix and retail brands by introducing more experiential trades like leisure, sports, entertainment, dining and training, and defensive retail businesses like supermarkets in our malls.

As at March 31, we have a diversified tenant mix with no trade sector accounting for more than 25% of rental income. Experiential trades and defensive retail businesses accounted for 60% of the trust’s total net lettable area.

3. Given Dasin Retail Trust’s focus on retail malls, how does the trust intend to compete with the rise in e-commerce trends in the country?

We believe that our malls are well-positioned to serve densely-populated suburban areas as we seek to be a one-stop centre, fulfilling daily needs of the community. To differentiate ourselves from e-commerce, we have actively increased the experiential retail mix to enhance our customer’s shopping experience.

In addition, we have developed our own member app which provides comprehensive information on available products and services, to provide a better customer experience.

The Covid-19 pandemic has provided us with better insights into our tenants’ businesses, enabling us to identify brands which are more suitable for bricks-and-mortar compared to e-commerce. This will help us in targeting and adjusting our tenant mix.

4. Dasin Retail Trust just completed its second acquisition: Shunde Metro Mall and Tanbei Metro Mall in Foshan City and Zhongshan City. How will this affect the trust’s operations and competitive position?

Shunde Metro Mall is located in Daliang Town, the most populated town in Shunde District of Foshan City while Tanbei Metro Mall is the only shopping mall situated near a number of residential communities in Dongsheng Town of Zhongshan City. With the acquisition, our presence in the Greater Bay Area is further strengthened and the enlarged portfolio will provide greater income resilience, improved occupancy rate and weighted average lease expiry (WALE).

The aggregate agreed property value of $375.5 million for both assets was at a significant discount of over 25% to appraised values by independent valuers. DPU without distribution waiver will increase by 19% and net asset value per unit will increase by more than 5% post-acquisition according to pro forma FY2019 financials.

5. What measures have been put in place to mitigate the impact Covid-19?

We organised live interactive broadcasts to drive tenant sales via our app, which has more than 470,000 members. From March to April, we held more than 40 live broadcasts, hosted by online influencers, to promote a wide variety of goods available at our malls.

We have also been simultaneously adjusting our trade mix by gradually phasing out traditional trades with relatively weaker operating capabilities, such as traditional home furnishing retailers and introducing brands that can attract customers like Haidilao Hot Pot.

With the new initiatives, monthly turnover rent gradually recovered between February and April. Turnover rent in April was 68% of average monthly turnover rent in 4Q2019 versus 36% in February. We believe recovery will continue and the situation will normalise soon.

6. Can you share more about your investment and growth strategy?

Our investment and growth strategy has three focus areas:

  • Geographical focus in Guangdong-Hong Kong-Macau Greater Bay Area (GBA) as we believe that there is significant asset appreciation potential in the area.
  • We hope to attract more diversified tenants to our retail malls
  • We focus on improving overall portfolio yield and ensuring long-term growth potential

In the short to medium term, we will actively manage our portfolio of malls to drive organic growth and new value through asset enhancement or property redevelopment initiatives. We will also seek accretive acquisitions and divest our mature assets to reinvest in new opportunities.

7. Can you share more about your sponsor, Zhongshan Dasin Holdings?

Established in the central cities of GBA since 1984, Zhongshan Dasin Holdings (Dasin Holdings) is a large private enterprise with businesses across multiple industries including real estate, retail, catering, food, hotel, education, finance, medical treatment and land transport.

Dasin Commercial, a key segment of the sponsor, has strategic partnerships with 1,600 top domestic and foreign brands. The construction area and reserved retail landbank of Dasin Commercial’s projects are both over 2 million sq m.

8. What role does the sponsor play in boosting your growth strategy?

The sponsor, one of the top real estate developers in Zhongshan, is involved in a myriad of businesses which are synergistic to Dasin Retail Trust such as Xinxuan restaurant, Dasin Medical and Dasin Education, that can be potential anchor tenants of our malls.

Due to the sponsor’s extensive experience in developing and operating malls in Zhongshan, it has been able to secure partnerships which can provide Dasin Retail Trust with access to a pipeline of attractive acquisition opportunities.

As at March 31, we have a strong pipeline of 17 right of first refusal (ROFR) properties in the GBA from our sponsor.

9. Will the DPU yield for Dasin Retail Trust be sustainable following the cessation of the distribution waiver of the major unitholders after 2021?

The two major unitholders of Dasin Retail Trust, Aqua Wealth Holdings and Bounty Way Investments, agreed to waive a portion of their entitlement to distributions for the benefit of other unitholders and to smoothen out the gestation periods for Dasin E-Colour and Ocean Metro malls, which are in their growth period.

The revenue, net property income and distributable income of our portfolio have grown at a CAGR of 9.6%, 8.8% and 9.0% respectively since IPO. In addition, the acquisitions of Doumen Metro Mall, Shunde Metro Mall and Tanbei Metro Mall will further accelerate DPU growth and narrow the gap between our core DPU and DPU with distribution waiver.

Going forward, we will continue to deliver competitive DPU yields through organic growth of the existing portfolio via rental adjustments, rental reversions and asset enhancement initiatives; as well as inorganic growth via accretive acquisitions.

10. What is Dasin Retail Trust’s value proposition to its shareholders and potential investors? What do you think investors may have overlooked about the business?

We believe that Dasin Retail Trust offers investors direct exposure to stable and mature retail properties with high growth potential in the fast-growing GBA. The development of the GBA could lead to an increase in rental rates and property valuation for Dasin Retail Trust in the long term.

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