SPH Reit 'well equipped to ride out turbulence'

PHOTO: SPH Reit 'well equipped to ride out turbulence'

THE three key strengths of good locations, a bright catchment that spells high human traffic, and a prominent sponsor should allow SPH Reit to ride out the economy's ups and downs, said the chief executive of the Reit's manager Susan Leng.

She told The Straits Times earlier this week: "Investors have put their money where they feel they will be able to benefit. They know SPH (Singapore Press Holdings), they know Paragon. Many even know Clementi Mall."

The vehicle holds Paragon, an upscale Orchard Road mall which accounts for 80.8 per cent of its gross revenue, and The Clementi Mall, a mid-market suburban centre.

The Seletar Mall is due for completion by the end of next year and will be sold to the real estate investment trust (Reit) then.

"Our locations are strategic and are good. With all these comes resilience," added Ms Leng.

She noted that Paragon is "tested" and has proven itself through the various business cycles.

"When your mall is resilient, it's in a good location, it'll be able to harness the kind of rental, and rental translates into distribution per unit (DPU) which is core to all investors."

Paragon announced a slew of new tenants yesterday, including well-known fashion brands Versace, Aigner, Balenciaga and Timberland.

A key factor affecting investor sentiment towards Reits now is the looming end to the United States central bank's monetary stimulus, and along with it, a hike in interest rates as early as next year. This could affect Reits, as it would increase refinancing costs and make it harder to raise funds.

But Ms Leng is not losing sleep over it. She said: "It's something that we will monitor, something that we are mindful of, to secure the most favourable interest rate for the Reit."

SPH Reit has a $975 million secured term loan facility of which it has drawn upon $850 million, and it has locked in 50 per cent of the $850 million debt at fixed interest rates.

Ms Leng admits that she was "pleasantly surprised" by SPH Reit's red-hot initial public offering (IPO) demand and its sterling trading debut late last month. Its placement tranche of about 224.9 million units was about 42 times subscribed, while the public offer of 84 million units had a subscription rate of about 25 times.

The counter surged from its IPO price of 90 cents to as high as $1 before closing 9 per cent up at 98.5 cents. Its share price has since dipped to 95.5 cents as of yesterday's close, due to the recent overall market weakness.

Ms Leng also revealed that she did not need to think twice when approached for the CEO post.

After all, this is not her first job involving Paragon.

When SPH acquired the mall in 1997, Ms Leng was general manager at Orchard 290, responsible for the profitability and continual growth of Paragon. She spent seven years there before leaving for Beijing with her family in 2004, as her husband had taken up a diplomatic post there.

"It's like coming home," said Ms Leng. "It's like your baby, you grew up with it, you never part with it... it's good to be back where you can continue to add value to the Reit."


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