Retail resurgence prompts RCR expansion
Retail properties are once again taking center stage for Gokingwei-led RL Commercial REIT Inc. (RCR) as the company ramps up plans to infuse more malls into its portfolio amid a recovery in consumer spending and foot traffic.
In a media briefing, the Robinsons Land Corp.-backed real estate investment trust said future asset infusions would “most probably” consist of malls. This signals a growing preference for retail assets over offices as the sector regains momentum after the pandemic.
“We’ll probably announce something in the next three months,” RCR director and treasurer Kerwin Max Tan said.
Tan added that the planned infusions would likely be done in tranches depending on market conditions.
The shift marks a notable evolution for RCR, which initially listed primarily office assets at a time when offices were considered the most resilient real estate segment coming out of the pandemic.
“But all of a sudden, there’s been a recovery already in terms of the malls. Then the malls became the most likely and preferred asset class,” Tan said.
RCR said malls currently account for 53 percent of its portfolio by gross leasable area. Offices make up the remaining 47 percent.
But malls already contribute slightly more to the company’s bottom line at around 55 percent, supported by improving tenant sales and stronger foot traffic.
The company noted that malls offer “a very beautiful upside” because of their fixed rent structure combined with a percentage share in tenant sales.
“I think eventually, if conditions permit and we are able to infuse substantially, the ratio of malls will be higher than offices,” the company said.
RCR said its sponsor, Robinsons Land, continues to provide a deep pipeline of assets for future infusion.
RCR said Robinsons Land plans to expand its mall footprint by another 50 percent to as much as 2.4 million square meters (sq m) by 2030. The office space segment is targeted to grow to 1.2 million sq m over the same period.
Logistics assets are expected to double in size while hotel room keys are projected to increase by 25 percent.
Despite elevated oil prices and fears of an economic slowdown, RCR said it was managing risks through operational efficiencies and sustainability initiatives.
The company said 10 office buildings under RCR have already shifted to renewable energy sources, while solar panels, green building certifications and guaranteed power supply agreements help cushion the impact of fuel price volatility.
RCR also highlighted its strong 79-percent earnings before interest, taxes, depreciation, and amortization margin and a combined mall-and-office occupancy rate of 96 percent, which management said remained well above industry averages.
