This afternoon (24 November 2021), SPH REIT (SGX:SK6U), with a financial year ended 30 August 2021, held its latest annual general meeting (AGM), which I’ve attended as a unitholder to seek the latest updates by its management.

The meeting was a pretty short one (lasting just under 30 minutes from start to finish) and attended by just 50 people (I felt the attendance was a bit on the low side), with no option for attendees to ask any questions live (which was a little bit of a disappointment, considering many companies when they held their AGMs in the earlier part of this year made this option available.)

Just like for all the AGMs I’ve attended, for the benefit of those who could not attend the meeting, you can read about a summary of the main pointers, along with results of the 3 resolutions put to vote during the meeting, in this post:

SPH REIT’s Portfolio:

  • With a total of just 2 retail malls during its IPO (Paragon and The Clementi Mall), CEO Ms Susan Leng shared that its portfolio have expanded to 5 malls – with The Rail Mall acquired in June 2018, an 85% stake in the Figtree Grove (in Australia) acquired in December 2018, and a 50% stake in Westfield Marion (in Australia) acquired in December 2019.
  • Ms Leng also shared that there are 2 malls to which SPH REIT have the right of first refusal (ROFR) to – The Seletar Mall which opened in 2014, and also The Woodleigh Mall which is currently under construction. On top of that, the REIT will continue to explore suitable acquisition opportunities that will add value to its portfolio, and improve returns to its unitholders.

Key Financial Highlights (FY2019/20 vs. FY2020/21):

  • Gross revenue improved by 14.8% from $241m to $277m, and net property income went up by 11.4% from $182m to $$203m due to the first full year contribution from Westfield Marion Shopping Centre.
  • In terms of revenue and net property income contribution by the individual properties, they have all improved, as follows:
    • Gross Revenue:
      • Paragon – from $146.5m to $159.9m
      • The Clementi Mall – from $36.6m to $41.4m
      • The Rail Mall – from $5.0m to $5.7m
      • Figtree Grove – from $15.9m to $17.2m
      • Westfield Marion – from $37.5m to $53.0m
    • Net Property Income:
      • Paragon – from $112.7m to $119.4m
      • The Clementi Mall – from $26.5m to $29.9m
      • The Rail Mall – from $3.9m to $4.4m
      • Figtree Grove – from $12.5m to $13.3m
      • Westfield Marion – from $26.3m to $35.6m
  • Additionally, the 98.5% jump in its distribution per unit from 2.72 cents/unit to 5.40 cents/unit is inclusive of a 0.52 cents/unit of distribution deferred from the previous financial year.

Portfolio Occupancy Profile:

  • The REIT’s overall portfolio occupancy rate continue to remain high at 98.8%.
  • However, as a result of the weak business sentiments due to headwinds related to the ongoing Covid-19 pandemic, rental reversion was at -8.4% (where its Singapore assets saw its rental reversion at -8.2%, while its Australia assets recorded a rental reversion of -10.8%.)
  • While all of REIT’s retail malls saw declines in its visitor traffic, and the same can be said for tenant sales (except for The Clementi Mall, due to the fact that its a suburban mall, and also Westfield Marion, as the mall was only disrupted by a snap 7 day lockdown.)
  • For the REIT’s portfolio weighted average lease expiry (WALE), it was at 5.4 years by net lettable area, and 2.7 years by gross rental income. Particularly, Ms Leng highlighted that the huge percentage of lease expiries (in FY2025/26 and beyond) for Westfield Marion and Figtree Grove was due to the anchors as well as the mini-anchors that have a 15-25 year lease period.

Debt Profile:

  • Gearing of 30.3% provides ample debt headroom.
  • 76% of their borrowings were secured either at fixed rates, or by interest swap arrangements.
  • Also, there remains $225m of revolving credit facility lines undrawn.

Outlook Ahead:

  • The retail market is slowly recovering as countries are slowly embracing Covid-19 as an endemic. That said, however, any resurgence in the number of cases may dampen recovery.
  • Tourist arrivals will continue to face headwinds, and Ms Leng is of the opinion it will take some time to return to pre-Covid levels (and as such, Paragon will continue to be affected). However, she added that Westfield Marion will see its visitor footfall and tenant sales improve from domestic reopening in Australia.
  • The REIT’s near-term focus will be on keeping vacancies to the minimum, maintain a sustainable rental income, and provide support to its tenants to help them tide through this difficult period. At the same time, they will continue to adopt an agile and disciplined approach to exploring asset acquisition opportunities to capitalise on market recovery and growth.

Results of Resolutions Put to Vote During the AGM:

  • Resolution #1, which is to receive and adopt the report of DBS Trustee Limited, as trustee of SPH REIT (the “Trustee”), the statement by SPH REIT Management Pte Ltd, as the manager of SPH REIT (the “Manager”), and the audited financial statements of SPH REIT for the financial year ended 31 August 2021 together with the auditors’ report thereon, was passed with 99.98% (or 2,076,475,463) of the votes for, and 0.02% (or 359,600) of the votes against.
  • Resolution #2, which is to re-appoint KPMG LLP as the auditors of SPH REIT to hold office until the conclusion of the next Annual General Meeting of SPH REIT, and to authorise the Manager to fix their renumeration, was passed with 99.98% (or 2,076,990,163) of the votes for, and 0.02% (or 515,800) of the votes against.
  • Resolution #3, which is to authorise the Manager to issue units and to make new or grant convertible instruments, was passed with 98.97% (or 2,056,189,784) of the votes for, and 1.03% (or 21,316,179) of the votes against.

Related Documents:

Disclaimer: At the time of writing, I am a unitholder of SPH REIT.

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