SPH REIT’s Business: 6 Things Investors Might Not Know, But Ought To

Credit: SPH REIT Management Pte Ltd.

SPH REIT  (SGX: SK6U) is a real estate investment trust (REIT) focused around properties mainly used for retail purposes in Asia Pacific.

The REIT is an owner of two retail real estate properties in Singapore, namely Paragon and Clementi Mall. SPH REIT’s sponsor and main shareholder is Singapore Press Holdings Limited  (SGX: T39).

Here are six pieces of useful information about the REIT that many investors may not be aware of. For the first three, go here. Here are the next three:

  1. SPH REIT’s tenant leases often have a three-year tenure and the terms include a base rent and a percentage of the tenant’s sales (also known as turnover rent). But, less than 3% of the gross revenue from the REIT’s portfolio comes from turnover rent. SPH REIT believes that its lease terms gives its business stability. Furthermore, 35% of its tenant leases have a step-up clause which increases the base rent during the lease term.
  2. The REIT listed in mid-2013. At the start, it took on a $850 million loan and the loans have a maturity which are concentrated in some years. For instance, $320 million – or around 38% of the $850 million – would come due in 2018. SPH REIT has been working to spread out the risk of refinancing. During the year, the REIT refinanced a $250 million tranche to two tranches of $125 million each that would be come due in 2019 and 2021. To add to that, 50% of the new tranches are on fixed rate interest rates. Overall, the REIT’s total borrowings on fixed interest rates are currently around 86%.
  3. SPH REIT recently noted that the occupancy rate in the Orchard and Scotts Road areas have been moderating since 2013. But, it also revealed that Paragon has been able to maintain full occupancy despite the general downtrend. The REIT said that this is reflective of the property’s premier position as one of the top shopping malls in Singapore.

If you like to learn more about SPH REIT, click here and here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.