SGX-listed Sasseur REIT is the first outlet mall REIT listed in Asia. It offers investors a unique opportunity to invest in China’s outlet retail industry – with 4 outlet malls in Chongqing, Bishan, Hefei, and Kunming.
Its outlet malls are focused on discounted fashion and sportswear, which appeals to value-conscious customers.
Sasseur REIT also takes a unique Entrusted Management Agreement (EMA) model to managing tenants and brands at its outlet malls – comprising a fixed and variable component to provide stable income as well as align its interests with its tenants.
This not only aligns its interest with tenants, but means that Sasseur REIT actively supports their operational success – lending support in sales strategies, promotional planning, pricing, inventory management and insights into evolving consumer behaviours and market trends.
To drive the outlet malls success, Sasseur REIT has a “super outlet” blueprint: A x (1+N) x DT x S.
– A or Art represents the unique outlet designs to enhance brand identity and customer loyalty.
– 1+N combines shopping with lifestyle experiences, such as “Super Sports”, “Super Kids” and attractions like a zoo (hefei outlet) and strawberry farm (Chongqing Bishan outlet) – boosted engagement and footfall.
– DT or Data Technology helps it to leverage big data to optimise tenant mix and operations.
– S or Sustainability reflects is commitment to eco-conscious growth and community values.
Sasseur REIT offers REIT investors a valuable opportunity to gain exposure to Chinese consumers, and here are 5 things you should know.
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#1 Sasseur Reit’s DPU Has Moderated Slightly In Recent Years. How Is The Manager Planning To Grow DPU?
Distribution per Unit (DPU) peaked in FY2021 and was driven by strong tenant sales, supported by relaxed COVID-19 restrictions in China and increased consumer preference for value-for-money outlet shopping.
Since then, DPU has moderated slightly due to macroeconomic challenges such as weaker domestic consumption, cautious consumer sentiment, and inflationary pressures. Additional contributing factors include a stronger Singapore dollar (SGD) against the Renminbi (RMB), rising offshore financing costs since FY2022 and, a change in accounting treatment of upfront costs, which are no longer added back to distributable income. From FY2024, partial payment of management fees was also made in cash.
To support sustainable DPU growth, the Manager is focused on three key strategies:
Proactive Asset Management
– Targeted Asset Enhancement Initiatives (AEIs) for more engaging retail experiences
– Stronger brand partnerships and VIP customer engagement to boost sales
Prudent Capital Management
– Optimising capital structure and reducing financing costs through competitive funding and hedging
– Strengthening natural hedging to manage currency risk
– Maintaining a strong balance sheet to support resilience and growth
Acquisition-Led Growth
– Pursuing yield-accretive acquisitions
– Leveraging the Sponsor’s network in China for project sourcing and support
#2 Sasseur REIT’s Aggregate Leverage Is The Lowest Among S-REITs. How Does The Manager Approach Capital Management, And What Factors Would It Consider Before Raising Its Gearing?
Our capital management approach is grounded in prudence and long-term sustainability. We prioritise delivering stable and high-quality DPU, which is primarily supported by strong operating cash flows rather than reliance on high leverage. Maintaining a low aggregate leverage provides us with greater financial flexibility and resilience, particularly during periods of market volatility.
That said, we remain open to increasing our gearing if a compelling opportunity arises – specifically, when there is a clear market window to acquire a yield-accretive outlet asset. Our goal is to strike the right balance between enhancing returns for unitholders and preserving financial strength.
#3 Can You Explain More About The Entrusted Management Agreement (EMA) Model Used By Sasseur REIT? How Can Investors Benefit From Such A Model?
The Entrusted Management Agreement (EMA) model is a key differentiator for Sasseur REIT. Under this structure, an Entrusted Manager (EM)—typically a Sponsor subsidiary—manages daily operations of the outlet malls in China.
Key Benefits:
– Commission-Based Revenue: Gross Revenue is a percentage (8%–16%) of tenant sales, aligning incentives with tenant success.
– Stable Income for REIT: Revenue is split into:
— Fixed Component: Based on historical performance, escalating 3% annually.
— Variable Component: Tied to actual sales (4%–5.5%), offering upside potential.
Incentivised Management: EM receives up to 30% of Gross Revenue and shares in performance gains, ensuring alignment with REIT success.
The EMA model effectively balances risk mitigation with upside participation. It combines the operational agility and market expertise of an on-the-ground manager with the income stability expected by REIT investors. This structure enables Sasseur REIT to deliver both resilient base income and growth potential.
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#4 Are There Any Plans To Diversify And Grow Beyond The Four Properties That Sasseur REIT Owns In Chongqing, Hefei And Kunming?
Sasseur REIT remains committed to delivering stable returns and long-term capital growth. As of 28 February 2025, our distribution yield stands at 8.8%, around 190 basis points above the sector average.
Our immediate focus is on maximising performance through targeted asset management and strong consumer engagement. We continue to optimise tenant mix with leading brands, execute Asset Enhancement Initiatives (AEIs), and grow our VIP customer base to support tenant sales and income quality.
Portfolio diversification and growth remain key strategic priorities. Seeking accretive acquisitions continues to be a core focus for 2025 and beyond. We are actively identifying and evaluating opportunities to expand our portfolio in a disciplined and value-enhancing manner.
In particular, we will look to leverage our Sponsor’s strong pipeline, including outlets malls under our Right of First Refusal (ROFR), as well as consider selective third-party assets that are currently managed by the Sasseur Group. These assets offer strategic alignment and operational synergy, given the Group’s deep expertise in outlet mall management.
Our goal is to pursue acquisitions that are DPU-accretive, support long-term growth, and enhance unitholders’ value – while maintaining prudent capital and risk management practices.
#5 What Is The Group’s Biggest Risk Or Challenge In The Next 1-3 Years That Shareholders Should Be Most Concerned About? And How Is The Group Preparing Itself For It?
One of the most significant risks facing the Group over the next 1–3 years is currency fluctuation—specifically, the depreciation of the (RMB). As our assets and income are predominantly RMB-denominated, currency volatility could impact our distributions when converted to Singapore dollars. To mitigate this risk, we have increased our RMB denominated borrowing and implemented a robust hedging strategy, as outlined in earlier responses, which includes forward contracts to stabilise our distributable income.
From an asset management perspective, the outlet industry in China is navigating several key challenges:
Key Challenges and Risks:
– Geopolitical Tensions: Ongoing global tensions – particularly between China and major economies – can create uncertainty in trade and negatively influence consumer sentiment.
– Economic Slowdown: Slower GDP growth in China may lead to more cautious consumer spending, which can affect retail performance, including that of outlet malls.
– Evolving Consumer Preferences: Shoppers are increasingly seeking value-for-money purchases, experiential retail, and digital integration, which may challenge traditional outlet business models.
Mitigation Strategies:
– Enhancing Customer Experience: We are curating more immersive and experiential shopping environments through thematic events, personalised services for VIP members, and family-oriented activities. By creating a vibrant, lifestyle-oriented destination that combines shopping, dining, and entertainment, we aim to increase dwell time and customer loyalty—particularly among the growing middle class.
– Strategic Partnerships: We continue to build partnerships with established brands and retailers, leveraging their market presence and expertise to strengthen our asset performance.
– Tenant Mix Optimisation: We actively review and fine-tune our tenant mix to ensure a balanced representation across retail categories. This includes assessing tenant performance and adapting to consumer trends.
– Flexible Leasing Strategies: We are adopting more flexible leasing models, such as short-term leases and pop-up stores, to introduce new, trendy brands and maintain a dynamic retail environment.
By proactively addressing these risks through financial discipline, strategic innovation, and operational agility, we aim to maintain the resilience of our portfolio and deliver sustainable returns to our unitholders.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 25 March 2025 and republished with permission. You can read more about Sasseur REIT (SGX: CRPU) on the SGX website.
You can also read other featured companies from SGX’s 10 in 10 series on the DollarsAndSense website.
