SPH REIT Acquires 50.0% Interest in Westfield Marion Shopping Centre, Adelaide, South Australia

When SPH REIT announced its FY19 full year results, I mentioned that the debt gearing currently stood at 27.5% which I felt is low for a retail REIT and there is definitely further room for more acquisitions.

On 7th November 2019, SPH REIT announced the acquisition of 50% in Westfield Marion Shopping Centre, Adelaide, South Australia. The other 50% stake is managed by Scentre Group Limited (“Scentre Group”), the largest Australian Retail REIT.

Westfield Marion Shopping Centre houses 327 tenants and have a high occupancy of 99.3% by Gross Lettable Area (“GLA”). The Weighted Average Lease Expiry (“WALE”) is 6.7 years by GLA and 4.2 years by income.

A picture speaks a thousand words. Post acquisition, you can see that Westfield Marion will make up 15% of SPH REIT’s portfolio valued at S$4.2 billion. The acquisition will be funded via the combination of proceeds from the S$300.0m of perpetual securities issued on 30 August 2019, debt and/or equity fund raising.

Rationale for Acquisition

I shall not touch into the details for the rationale for acquisition as you can find the details from the presentation slides. The important to me is the post acquisition DPU on whether it is accretive or not.

  • Deepens strategic presence in Australia with entry into attractive and stable Adelaide market.
  • Dominant, destination lifestyle mall in South Australia.
  • Complementary acquisition, adding to resilience, diversity and quality of SPH REIT’s portfolio.
  • DPU and NAV per unit accretive transaction.

Pro forma FY2019 DPU

Below is the illustrated Pro forma based on FY2019 DPU. We are expected to get 0.09 cents more post acquisition. Oh well, not much difference in terms of dividends to be collected.

SPH REIT Full Year DPU for FY19 Up 1.1%

I was extremely busy with work this month and thus didn’t have time and energy to catch up on the financial results of the stocks and REITs that I have held in my stock portfolio. Earlier this year, I have added SPH REIT to my stock portfolio. SPH REIT currently makes up 11% of my entire stock portfolio.

On 10th October 2019, SPH REIT announced their 4QFY19 financial results. The results are inline with my expectations. The most important of all, Distribution Per Unit (“DPU”) increased by 2.1% to 1.46 cents.

The full year Distribution Per Unit (“DPU”) continued its growth by 1.1% to reach 5.60 cents for FY19. Read More

NTUC Capital Plus Versus Singapore Savings Bonds Versus SPH REIT

You probably would have read about the latest Endowment Plan offered by NTUC Income. The latest tranche NTUC Capital Plus (CSN2) offers you 2.3% guaranteed yield per annum. The endowment is a 3 year single premium endowment plan which you can purchase via cash or using your Supplementary Retirement Scheme (SRS) fund. There is a minimum premium of S$20,000. When the policy matures 3 years later, you get a guaranteed maturity benefit. This means that if you place S$20,000, at the end of 3 years, the maturity value will be S$21,412 inclusive of your principal amount and thus a profit of 7.06%.

NTUC Capital Plus (CSN2) Versus Singapore Savings Bonds

How does this compare to latest issue of the Singapore Savings Bonds? Let say if you have purchased S$20,000 of the latest issue of Singapore Savings Bonds (September 2019 GX19090H), you will get a total return of S$990 if you redeem it in September 2022. NTUC Capital Plus (CSN2) wins!

NTUC Capital Plus (CSN2) Versus SPH REIT

How does NTUC Capital Plus (CSN2) fare against REITs? In my opinion, REITs are low risk investment instruments. For comparison, I will use SPH REIT which I felt that the share price has been relatively stable over the years. Based on a distribution of 5.54 cents in FY2018 and the current price of S$1.10 (as of 27 August 2019), this translates to a dividend yield of 5.04%.

If we have bought SPH REIT today, 3 years later, we should collect an estimated total dividends of 5.04% x S$20,000 x 3 years = S$3,024. SPH REIT wins! The risk here is that there is no guarantee you can get your principal amount of S$20,000 back 3 years later as this is subjected to the stock market conditions at that point in time.

Conclusion

NTUC Capital Plus (CSN2) Singapore Savings Bonds (GX19090H) SPH REIT
Total (S$) collected based on investment amount of S$20,000 for 3 years S$1,412 S$990 S$3,024

This is not a recommendation to buy or sell the above products but for illustration purposes only. If you can stomach the volatility of the stock market, then consider REITs for higher returns. Otherwise, NTUC Capital Plus may be a better choice if you have spare cash to lock down for 3 years. On the other hand, it does make sense to use your SRS to purchase NTUC Capital Plus (CSN2) for the higher yield since SRS can only be withdrawn after your retirement age. For those who foresee you need cash on hand in the near future, the Singapore Savings Bonds is almost risk free and safe haven.