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CapitaLand Mall Trust’s 2017 Annual Report: 3 Key Takeaways from the Message to Unitholders

CapitaLand Mall Trust (SGX: C38U) is Singapore’s first and largest retail real estate investment trust (REIT). Some of the malls in its portfolio include Clarke Quay, Junction 8, and Plaza Singapura.

The REIT released its annual report for the financial year ended 30 December 2017 (FY2017) in the middle of last month. I learnt a few things as I was reading through the Message to Unitholders, one of the many sections of the report, by the chairman and chief executive officer of the REIT’s manager. Here are my three main takeaways.

The new trend

E-commerce is giving traditional brick-and-mortar shops a run for their money. To be still relevant in today’s market, traditional retailers must keep up with the times. CapitaLand Mall Trust is not insulated from the transformation.

The REIT’s chairman, Richard R. Magnus, and chief executive, Tony Tan, explained:

“With the rise of omni-channel retailing and entry of new players, Singapore’s retail scene is undergoing transformational changes. Online businesses and brick-and-mortar retailers are increasingly crossing over to each other’s domain, sparking off new offline-and-online experiences that bring new vitality to the sector. As Singapore’s largest mall owner, we continue to push the boundaries and explore new ways to future-enable our malls and retail services. Our goal is to create spaces that provide quality and unique experiences, meeting the needs of not just today’s shoppers, but also those of generations to come.”

Pulling in traffic

One way that CapitaLand Mall Trust is integrating offline and online shopping is by having “click-and-collect” lounges available in its malls through CapitaLand Limited’s (SGX: C31) link-up with prominent e-commerce player, Lazada. The seven lounges can be found at Bedok Mall, Bugis+, IMM Building, JCube, Plaza Singapura, Tampines Mall and Westgate.

With the collaboration, shoppers can enjoy an additional option of collecting their online purchases at any of the seven lounges. Once at the malls, those shoppers might also make other purchases at the malls’ brick-and-mortar retailers. It is a win-win situation for all parties involved.

The trio of flagship marketing programmes, CapitaStar, CapitaVoucher and CapitaCard have also helped to pull in the traffic to the REIT’s malls. The programmes increase “shopper loyalty with rewards that can be enjoyed across our malls”. In 2017, CapitaLand Mall Trust’s malls registered a healthy annual shopper traffic of 346.3 million and a commendable 99.2% occupancy rate (excluding Funan), as at 31 December 2017, despite the retail slowdown.

Updates on Funan

Funan was shuttered in July 2016 for redevelopment. Magnus and Tan said that the “construction of the Funan integrated development is progressing well and on track to be completed in 4Q 2019”. Even though there is some time for the works to finish, the mall has “received strong leasing interest for its retail and office components”. WeWork, a global coworking space operator, has become Funan’s first office tenant, taking up 40,000 square feet of space.

During the year, the REIT also divested Funan’s serviced residence component to Ascott Serviced Residence (Global) Fund Pte Ltd at an agreed land value of S$90.5 million. The divestment will help to lower CapitaLand Mall Trust’s “overall development risks and enhance our financial flexibility”.

As at 31 December 2017, the REIT had an aggregate leverage ratio of 34.2%, a slight improvement from 34.8% seen a year ago.

The Foolish bottom line

The retail scene is seeing a transformation of late, and CapitaLand Mall Trust is certainly not resting on its laurels. From integrating offline and online shopping to increasing shopper loyalty, it looks to me that the REIT is doing the right things to thrive in the changing retail landscape.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of CapitaLand Mall Trust. Motley Fool Singapore contributor Sudhan P owns units in CapitaLand Mall Trust.