SPH REIT grapples with lower tenant sales in Q4

The softening retail market is the culprit.

SPH REIT’s two malls booked lower tenant sales in for the firm’s fourth quarter ended on 31 August. Paragon’s tenant sales fell by 4.5%, while Clementi Mall’s tenant sales slid by 3.3%.

According to OSK DMG, this has impacted Paragon with a higher occupancy cost for its tenants to 18.1% from 15.7% since listing.

“Despite a strong portfolio rental reversion of 8.5%, we think that a high single-digit rental reversion is unlikely in the near term. This is underpinned by a softening retail market. We are cautious of the downward trend in tenant sales as it will impact rental rates,” noted OSK DMG.

On the bright side, SPH REIT reported its income distributable to unitholders at $34.9m, translating to a distribution per unit of 1.39 cents for 4Q FY14, an increase of 6.1% against IPO forecast. The 4Q FY14 distribution will be paid to unitholders on 14 November 2014.

The aggregate DPU of 5.99 cents for the period from the year-to-date period was higher than forecast by 3.8%. On an annualised basis, the distribution represented a yield of 6.0%, based on IPO price of $0.90 and 5.1%, based on closing price of $1.065 on 29 August 2014.