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SMRT's new Wave of revenue

OPENING SOON: The Singapore Sports Hub mall has been named Kallang Wave, and will have anchor tenants such as FairPrice Xtra and H&M.


    May 15, 2014

    SMRT's new Wave of revenue

    IN A nod to the National Stadium, the Singapore Sports Hub mall, which starts opening for business from the second half of next month, was yesterday titled Kallang Wave.

    More than 80 per cent of the 41,000 sq m retail space at the mall, operated by a joint venture between SMRT Corp, which holds 70 per cent, and supermarket chain NTUC FairPrice, has already been snapped up.

    It will have a FairPrice Xtra which will be Singapore's first "sports-themed" hypermarket, offering sports equipment along with household items, said Tan Kian Chew, Group CEO of NTUC FairPrice.

    Other anchor tenants include H&M, Uniqlo and Harvey Norman, with Brewerkz, Poulet, Astons and Shokudo among the food and beverage outlets.

    The mall could pave the way for dramatic growth of SMRT's non-fare revenue. The complex's retail space is more than the 36,000 sq m the transport operator has at its entire rail network.

    The group's rental income was $73.4 million for the year ended March 31, 2014 - or 87 per cent of its total operating profit. Assuming a similar business model, the new mall could boost SMRT's rental revenue by 80 per cent once all the space is taken up.

    But observers reckon that there will be material differences.

    For one thing, net lettable space will be less than 41,000 sq m, and rents could be lower than what SMRT charges at its stations. Rental yield is also likely to be weaker.

    DBS Vickers analyst Andy Sim said: "The fee SMRT pays the Land Transport Authority for the station space is next to nothing; its rental margin is over 70 per cent. But for the Sports Hub retail mall, SMRT is a master lessor and its margin will be nowhere near what it gets from rental at its stations."

    Mr Sim added that, in absolute terms, rental rates may also be lower than the $20 to $21 per sq ft per month that SMRT gets for station rental.

    He noted that the Sports Hub was not yet a proven destination. "The concept is nice but, ultimately, they'd have to price it attractively to draw tenants," he said.

    SMRT's managing director of commercial business, Dawn Low, said at a preview of the venue yesterday that Kallang Wave will be "accretive" to revenue, and that its rental rates are "competitive".