Paragon’s negative rental reversion of 7.1% pulled down revenue.
SPH REIT’s Q2 net property income (NPI) dipped 1.1% to $42.2m mainly due to lower revenue at Paragon. According to its financial statement, distributable income fell 3.3% to, whilst distribution per unit (DPU) held steady at 1.4 cents. For the half year, the aggregate DPU is at 2.74 cents. This will be paid to unitholders on 16 May 2018.
SPH REIT noted that typically, renewals or new leases are committed about a year before expiry. Paragon recorded a rental reversion of -7.1% for new and renewed leases in 1H 2018, mainly due to negotiations during the retail sales downturn since 2014.
The Clementi Mall had only three changes in tenancies which represented 1.4% of the mall’s net lettable area. The overall portfolio rental reversion remains at -7.1%.
“However, tenant sales in the malls have grown, in tandem with the recent recovery in retail sales since June 2017. In addition, both properties continued their track record of full occupancy,” the REIT said.
SPH REIT CEO Susan Leng said, “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.
Leng added that Paragon is set to benefit from positive tourist arrivals and spend for 2017. “The forecasted GDP growth of ‘1.5% to 3.5%’ bodes well for Singaporeans and The Clementi Mall is well poised in the suburban to continue to serve its immediate catchment. Our focus remains to drive long-term value of our properties and deliver sustainable returns for our unitholders,” she added.
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