How Newstead liquidation will affect the listed REITs

An entrance to Suntec City mall; taken October 2018.An entrance to Suntec City mall.

The provisional liquidation of local electronics retailer Newstead will have a net negative impact on some REITs, but overall earnings hit shouldn’t be substantial, CGS-CIMB said in a note this week.

It also noted that REITs usually hold around two to three months rent as security deposits form tenants, which can create a buffer while they look for new tenants.

Newstead has outlets across multiple Singapore malls, with its shops in Suntec City, Marina Square and one of the Sim Lim Square outlets labelled as closed on its website, the brokerage said.

CapitaLand Mall Trust, which owns Tampines Mall, Bedok Mall and Funan as well as part of Raffles City, Frasers Centrepoint, which owns Causeway Point, and Suntec REIT, which owns Suntec Mall, all set to be impacted, it said.

For CapitaLand Mall Trust, the biggest Newstead footprint was in the not-yet-reopened Funan, where the retailer had reserved 15,000 square feet of space, or 4.5 percent of the total retail net lettable area, it said. In other CMT malls, Newstead’s Nubox brand occupied around 1,000 square feet of floor space each in Raffles city, Tampines Mall and Bedok Mall, it said.

“Due to the small floor space occupied in the existing malls, we believe DPU impact will be minimal,” CGS-CIMB said. “Funan has yet to open and is receiving favourable lease queries. Hence, we believe CMT will be able to find a replacement if Newstead pulls out.”

For Frasers Centrepoint Trust, Newstead’s Nubox store only occupied around 0.5 percent of the total net lettable area of Causeway point, with the location at level one, which should make it easier to find a replacement, CGS-CIMB said.

For Suntec REIT, the retailer occupies around 0.4 percent of Suntec Mall’s net lettable area, it said.

“Well-located at level 1 in the North Wing, we believe it would not be an issue to fill the vacated space in the future,” the note said.

It rates CapitaLand Mall Trust at Hold with S$2.21 target price, Frasers Centrepoint Trust at Add with S$2.49 target price and Suntec REIT at Add with S$2.08 target price.

Suntec REIT ended Wednesday down 0.54 percent at S$1.83, CapitaLand Mall Trust shed 1.40 percent to S$2.12 and Frasers Centrepoint Trust lost 0.45 percent to S$2.22. The STI was down 1.11 percent on Wednesday.

 

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