Perennial China Retail Trust's furniture mall gets 72% occupancy boost

It nudged income to S$1.5m.

According to DBS, results in line, supported by Earn Out. PCRT reported 3Q12 results that were in line with projections. Operating income at associate and JCE level was S$1.5m, up 5.5% q-o-q.

Here's more from DBS:

This was achieved on the back of improved occupancy of 72% at Red Star Macalline Furniture Mall (vs 50.6% in 2Q) while occupancy and average rents at the Shenyang Longemont Shopping Mall held steady at 70%, with rents averaging Rmb3.72psm/day.

There was also a top up of S$12.2m of earn out deed support during the period. This was partly offset by higher interest expense of S$1.5m for the recent MTN raised.

Gaining a little traction at Shenyang. PCRT had converted Red Star Macalline’s (RSM) lease at the furniture mall to a master lease from Sep 12. The lease is for more than 10 years at a slightly lower average rent of Rmb1.35psm/day but offers security of long term tenure.

Effectively, RSM takes c.60% of the furniture mall’s total GFA. Occupancy of the Shenyang Longemont Mall (SLM) remained relatively flat at 70% with rents unchanged at Rmb3.72psm/day despite tenant mix shifting towards a little more cosmetics and fashion related.

The Shenyang office space has seen slightly higher interest for about 10% of space (vs 1% previously) and these are currently under negotiation and review.

Taking time to ramp up. Looking ahead, we believe 4Q would remain relatively flat q-o-q as PCRT will continue to ramp up take up rates at the Shenyang Longemont shopping mall with more entertainment and education related tenants expected to commence from 1Q13.

Meanwhile leasing activities at the office component, scheduled to commence in 4Q12, is expected to accelerate during its Earn Out period. With the conversion of RSM into master lease, the group would focus on leasing out the remaining space and is expected to target wholesale tenants.

Perennial Jihua Foshan, currently 50% pre-leased at Rmb4plus psm/day, is expected to open at end 1Q13. This will improve the trust’s operating cashflow position. This should be complemented by the Perennial Qingyang Mall in Chengdu in 2Q14.

Gearing at 30.1%. With the latest $130m MTN note issue, PCRT’s gearing had risen to 30.1%. The proceeds will be deployed to paying for the 1st 15% installment of the Dongzhan Mall as well as investment in the Tongzhou project.