Singapore Retail REITs - DBS Research 2020-11-02: Robinsons Closure Unlikely To Be One-Off; Survival Of The Fittest

Singapore Retail REITs - DBS Research | SGinvestors.io FRASERS CENTREPOINT TRUST (SGX:J69U) CAPITALAND MALL TRUST (SGX:C38U) LENDLEASE GLOBAL COMMERCIAL REIT (SGX:JYEU)

Singapore Retail REITs - Survival Of The Fittest

  • Department stores have been under pressure given ongoing changes to consumer shopping preferences.
  • Retail S-REITs’ fortunes are closely tied with the Al-Futtaim Group, which is one of largest brand representative in Singapore.
  • Robinsons closure unlikely to be one-off; fashion retailers likely to consolidate towards “dominant malls” in the future.



Robinsons to shut its doors for good.

  • Robinsons Singapore (“Robinsons”), owned by Dubai-based Al-Futtaim Group, is expected to close for good, after more than a century in the business. While it evokes many sad feelings amongst shoppers who have grown up with the household brand, the pressures faced by the group is not new and have been ongoing for a few years.


Department stores have been reducing their store footprint over time.

  • The department store format has been under pressure over the past few years mainly due to changing consumer shopping preference towards e-commerce and with retailers preferring to head out with flagship stores on their own, department stores have also been reducing their store count and average store footprint over the past few years.
  • Robinsons has been rationalising its footprint in recent years and have closed its outlets in Marina Bay Sands (2013), The Centrepoint (back in 2014) and most recently its store at JEM (May 2020) in the West. The remaining shops at Heeren (Orchard) and Raffles City will remain open for final sales on existing goods.
  • Similarly, another household department store operator, Metro Singapore has also rationalised its store footprint over the past few years and now operates out of only two stores at the Paragon Singapore and Causeway Point.


COVID-19 struggles.

  • The COVID-19 pandemic, which has accelerated the adoption of e-commerce and effectively snuffed out marketing campaigns at regular “atrium sales” at shopping malls. This is probably the final nail to department store formats which, in our view, have struggled to establish an omni-channel presence. This may mean that pressures are likely to stay with landlords needing to provide a lifeline through rental rebates in the near term.


Landlords may be forced to think out of the box.

  • Department stores usually stand as anchor tenants within the malls given the large percentage of NLA leased. The Metro, which was previously Centrepoint’s anchor tenant, has given way to one of Decathlon’s (sporting goods) largest outlet in Singapore. The new tenant is currently taking up two levels in Centrepoint and over 6 individual units.
  • The exit of anchor tenants may result in a ‘black hole’ in shopping centres, especially if they are department store tenants. Landlords may have to get creative with the extra plot of space with the option to either
    1. find another anchor tenant to take up the entire space, or
    2. divide the retail plot into smaller ones with rental upside potential and consider the overall positioning of the asset going forward (e.g. will The Heeren be revamped into a millennial mall at the Somerset precinct should Robinsons vacate?).
  • That said, we do not think we will be seeing another Decathlon opening at Orchard any time soon!


Spotlight on department store exposure amongst S-REITs.

  • The recent weakness in share price for the retail S-REITs has been noteworthy in the past two weeks. We reckon this is due to nervousness given the second wave of infections in the UK/US impacting the global economic recovery and the questionable sustainability of the recent improvement in retail performance.
  • Given the low infection rates locally, coupled with inability to travel for leisure, we expect retail sales in Singapore to see an upward momentum in 4Q20, driven by F&B services. We believe that the suburban landscape will remain resilient, given the structural shift towards working from home, with a focus on dominant malls.
  • The spotlight is now on the exposure to department stores amongst the various S-REITs which currently range between 7% and 21% of gross revenues for Singapore (see summary of S-REITs' exposures to retail business in PDF report attached below).
  • Specifically on the exposure to Robinsons, CapitaLand Mall Trust (SGX:C38U) and now CapitaLand Integrated Commercial Trust (CICT) have an exposure of c.7% of revenues to department stores (with Robinsons in Raffles City being a key exposure). However, the consolidation with CapitaLand Commercial Trust (SGX:C61U) is estimated to bring the exposure down to < 2%.
  • Other department store operators in Singapore are


Al-Futtaim’s presence in Singapore is bigger than you think

  • One of the largest brand representatives in Singapore. The Al-Futtaim group is a conglomerate based in Dubai UAE and distributes a number of retail brands here in Singapore. Their distributorship in Singapore spans 20 retails brands including a number of household retail names such as Marks & Spencer, Zara and Mango.
  • Based on our collation, there are a total of 111 retail outlets across these 23 brands in Singapore with Royal Sporting House, Zara and Marks & Spencer taking the largest store count. Due to the higher-end positioning of these brands, location exposures for these shops are mostly in Orchard (c.42%) and CBD (c.27%), with the lowest exposure within the suburban (c.26%) precinct by store count. See summary table in PDF report attached below.
  • Amongst the listed S-REITs, we found that Al Futtaim has 56 shops across the various landlords with CapitaLand Mall Trust, Frasers Centrepoint Trust, CapitaLand (SGX:C31) (at Jewel and ION Orchard) having the largest exposure by store count at 15, 11 and 9 respectively. Orchard landlords such as Starhill Global REIT (SGX:P40U) (9 stores), Lendlease REIT (SGX:JYEU) (seven stores) and VivoCity owner Mapletree Commercial Trust (8 stores) are also not spared.


Fashion retailers remain in the consolidation mode.

  • Fashion is one of the trade categories that are bearing the brunt of the latest pandemic as people shift to work from home. With average portfolio retail sales still below that compared to a year ago, we believe that most retail brands may be looking to rationalise their footprint going into 2021. Shop closures will likely be carefully reviewed on a store-by-store and brand-by-brand basis in order to maximise profitability.


Other brand representatives are also hurting.

  • Wing Tai (SGX:W05), which is the brand representative of Topshop and Topman, just closed its last store in Vivocity in September, but continues to operate other international brands such as Adidas, G2000 and Uniqlo.
  • Through the pandemic, we continue to see the ‘survival of the fittest’ amongst retailers, with weaker brands and less popular retail formats (department stores) naturally crumbling first.

Pick S-REITs with “dominant malls”.

  • Over time, we believe that the dominant malls across Singapore will continue to attract tenants to maintain their occupancies in the longer term. On this front, the listed landlords should continue to see higher-than industry occupancy rates.
  • With retail sales expected to take time to recover to pre-COVID-19 levels, we believe that retailers will remain in consolidation mode in 2021. We also believe that they will want to keep their most productive stores, as per our report: Singapore F&B and Retail malls: The New Norm – Shopping and dining at your convenience.
  • We believe that selected S-REITs (Frasers Centrepoint Trust, CapitaLand Mall Trust and Lendlease REIT) have malls with dominant characteristics which allow them to attract tenants, keep occupancies higher than industry, and thus navigate well past the evolving retail landscape.








Geraldine WONG DBS Group Research | Derek TAN DBS Research | Rachel TAN DBS Research | https://www.dbsvickers.com/ 2020-11-02
SGX Stock Analyst Report BUY MAINTAIN BUY 2.950 SAME 2.950
BUY MAINTAIN BUY 2.400 SAME 2.400
BUY MAINTAIN BUY 0.900 SAME 0.900



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