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SPH REIT 2Q DPU comes in flat at 1.4 cents

Michelle Zhu
Michelle Zhu4/6/2018 06:24 PM GMT+08  • 2 min read
SPH REIT 2Q DPU comes in flat at 1.4 cents
SINGAPORE (Apr 6): The manager of SPH REIT has declared a 2Q distribution per unit (DPU) of 1.4 cents, unchanged from a year ago.
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SINGAPORE (Apr 6): The manager of SPH REIT has declared a 2Q distribution per unit (DPU) of 1.4 cents, unchanged from a year ago.

Over the quarter, gross revenue registered a 0.8% decline to $53.6 million from $54 million in 1Q17 on the back of lower rental income from Paragon.

Property operating expenses for 2Q grew marginally on-year by 0.5% to $11.4 million on higher utility rate contracted.

As such, net property income (NPI) fell 1.1% to $42.2 million from $42.7 million a year ago.

The latest 2Q DPU brings the aggregate DPU for 1H18 to 2.74 cents, unchanged from a year ago.

Based on the REIT’s unit closing prices as at end-Feb for 2017 and 2018, this translates to a 3% decline in annualised distribution yield to 5.53% from 5.70% in 1H17.

See: SPH REIT 1Q DPU held steady at 1.34 cents

In a filing on Friday, SPH REIT’s manager attributes Paragon’s negative rental reversion of 7.1% for new and renewed leases in 1H18 to negotiations during the retail sales downturn, which has been in place since 2014.

It also notes that the decline was more moderated in 2Q compared to the previous quarter.

Meanwhile, The Clementi Mall had only three changes in tenancies which represented 1.4% of the mall’s net lettable area (NLA).

While the overall portfolio rental reversion remains at -7.1%, the manager highlights there has been a growth in tenant sales from within its two portfolio malls, in tandem with the recent recovery in retail sales since June 2017.

In particular, the REIT manager underscores both properties’ continued track record of full occupancy.

Susan Leng, CEO of the manager, believes the positive data for tourist arrivals and spend in 2017 signals a trend which Paragon would stand to benefit from.

Citing the Ministry of Trade and Industry (MTI), she also opines that the forecasted GDP growth of 1.5-3.5% would bode well for Singaporeans, and that The Clementi Mall is well-poised in the suburban to continue to serve its immediate catchment.

“SPH REIT has delivered stable distribution and our well-positioned malls continued their track record of full occupancy. In keeping with our philosophy of treating tenants as business partners, we will work closely with them to ride through both cyclical and structural challenges in the retail environment. It is encouraging that our tenant sales have continued to register growth,” says Leng.

Units in SPH REIT closed 0.5% higher at $1 on Friday.

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