Pure-play China retail development business trust. Listed in June last year, Perennial China Retail Trust (PCRT) is Singapore’s first pureplay China retail development business trust. This means that there is no restriction on the number of development assets PCRT can hold, unlike a REIT. Gearing also is not capped, although management has a self-imposed limit of 60%.
Well-located properties. PCRT’s portfolio includes three properties in Shenyang and two suburban malls in Foshan and Chengdu that are still under construction. In addition, the business trust has the options and right of first refusal to prime commercial development sites directly connected to the high-speed rail (HSR) stations in Chengdu, Xi’an and Changsha. It recently obtained unitholders’ approval to acquire a 50% stake in Chengdu Longemont Mall, which will have a GFA of 455,260 sqm, to be built beside Chengdu’s HSR station.
Initial portfolio to be fully operational by 2014. PCRT’s initial portfolio comprises its 50% stakes in Shenyang Red Star Macalline Furniture Mall, Shenyang Longemont Shopping Mall, Shenyang Longemont Offices, Foshan Yicui Shijia Shopping Mall and Chengdu Qingyang Guanghua Shopping Mall. Currently, only the first two properties are in operation, but PCRT expects all the properties to be completed and income-producing by 2Q14. Even Chengdu Longemont Mall is expected to be completed by 3Q14.
Proven management record. PCRT’s sponsor is Perennial Real Estate Pte Ltd, helmed by Mr Pua Seck Guan. With over 20 years of real estate experience, Mr Pua was instrumental in Singapore’s first REIT listing of CapitaMall Trust and was CEO of CapitaLand Retail Limited (which later became CapitaMalls Asia). During his time at CapitaLand, Mr Pua was involved in the acquisition, development and management of 70 malls across China.
Ride the upside. PCRT unitholders can look forward to NAV growth as its properties get completed and stabilised, given the attractive acquisition costs which are on a completed basis. When China’s capital markets mature, there may be avenues to realise the enhanced value. In the meantime, unitholders are likely to be rewarded with a DPU of 3.86 cents for FY12F, translating to an attractive yield of 7.4%.
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