SINGAPORE (Apr 23): The manager of CapitaLand Retail China Trust (CRCT), which operates around a dozen malls in China, has reported “encouraging signs” of recovery following the closure of malls and suspension of business activities from late January to curb the spread of the coronavirus outbreak.
The REIT did not report any financial figures, including distribution per unit (DPU), as it will adopt the announcement of half-yearly financial statements with effect from FY2020 ending December. CRCT’s next financial results announcement will be for the half-year period ending June 30.
CRCT will also conduct property valuation on an annual basis instead of a half-yearly basis.
However, in a business update for 1QFY2020, the manager says all of CRCT’s malls have since reopened, with around 90% of stores back in operation over the latest weekend of April 18-19.
The Covid-19 containment measures have put a dent in CRCT’s total shopper traffic and tenant sales for 1QFY2020.
Excluding master-leased malls, total shopper traffic fell 37.6% y-o-y. Correspondingly, tenant sales excluding from the supermarket and department store dropped 42.5% y-o-y.
However, the manager reports signs of an encouraging month-on-month recovery.
In March, shopper traffic more than doubled compared to February, while tenant sales nearly trebled.
The manager says CRCT is in a “strong financial position” to ride through the challenges from Covid-19.
CRCT has early refinanced $150 million of term loans due in 2020 to 2026, and has no long-term debt maturing until 2021.
If necessary, the manager says it has undrawn uncommitted debt facilities of $237.1 million as well as security deposits of three months available to tap on.
The manager has also implemented cost containment measures during this period, including the postponement of non-essential capex to conserve cash flow, the reduction of general and administrative expenses, and the optimisation of utilities consumption, property maintenance and marketing expenses.
As at March 31, 2020, CRCT’s gearing has improved to 35.8%, from 36.7% as at end December 2019.
Average cost of debt stood at 2.89% with average term to maturity at 2.55 years, improving from 2.98% and2.84 years as at end-December.
Portfolio occupancy rate dipped 1.3 percentage points to 95.4% as at end-March, but remained strong.
Around 60% of CRCT’s leases this year are up for renewal in the second half of the year.
Weighted Average Lease Expiry (WALE) stood at 2.3 years by gross rental income, and 3.7 years by net lettable area.
Looking ahead, the manager say the targeted opening of CRCT’s Yuquan Mall by end-2020 is on track, despite the temporary suspension of original fit-out works in February. Work has since resumed in early April.
Short term volatility is expected amid the still-challenging business environment, but the manager remains cautiously optimistic for 2HFY2020 on the back of the Chinese government’s pro-business stimulus.
“[CRCT is] proactively positioned to capture opportunities as economic and business activities gain momentum,” the manager says in the business update.
Units in CRCT closed 1 cent lower, or down 0.8%, at $1.25 on Wednesday. Year-to-date, the counter is trading some 22.4% lower.
