BHG Retail Reit reported on Friday (Feb 23) a 80.5 per cent decline in distribution per unit (DPU) for the second half of 2023, despite higher net property income (NPI).

The China-focused retail real estate investment trust (Reit) saw DPU for the six months ended Dec 31, 2023, fall to S$0.0008 from S$0.0041 in the year-earlier period.

The lower DPU came on the back of lower distributable income, which fell 80.5 per cent on year to S$412,000.

For the full year, distributable income fell 63.2 per cent to S$2.2 million, while DPU slipped to S$0.0043 from S$0.0117 in FY2022.

The manager attributed the weaker distribution mainly to the weakening of the renminbi against the Singapore dollar and higher interest expense.

BHG Retail Reit reported stable gross revenue in the second half of 2023, amounting to S$30.9 million. Lower property expenses during the period resulted in a year-on-year increase in net property income to S$17.1 million from S$16.7 million in H2 FY2022.

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The Reit’s finance costs rose to S$10 million in H2 FY2023, from S$8.6 million in the same period a year earlier.

For the full year, gross revenue fell 6.7 per cent to S$62 million, while NPI slipped 7.3 per cent to S$35 million. Finance costs were up 25 per cent in FY2023, rising to S$20 million from S$16 million in FY2022.

Chan Iz-Lynn, chief executive officer of the manager said BHG Retail Reit’s portfolio of assets exhibited resiliency, with occupany remaining strong at 95.6 per cent.

“Looking forward, the manager will remain focused on executing its current strategy of refreshing and optimising its malls’ tenant mix, remaining prudent in its capital management, and pursuing yield accretive acquisition opportunities.” 

BHG’s gearing ratio stood at 39.9 per cent as at Dec 31, 2023, with an average cost of debt of 5.6 per cent.

According to the financial statements, the consolidated interest coverage ratio of the group was 1.8 times, which was lower than the debt covenant ratio of 2.0 times required by the banks.

The group’s current liabilities amounted to S$291.6 million as at Dec 31, 2023, up from S$6.9 million a year earlier.

BHG Retail Reit said that it obtained a waiver from the banks covering the period up till December 2023 and the loans are not due and payable in advance of their maturity date, which remains unchanged at Mar 14, 2025.

“As the waiver letter was obtained after the reporting date, the loans had to be classified from non-current to current as per the technical requirement of the accounting standards,” it noted.

Net asset value per unit fell to S$0.72 as at December 2023, from S$0.79 a year earlier.

The counter fell 1 per cent or S$0.005 on Friday to close at S$0.485, before the results.