Sasseur REIT is a real estate investment trust (REIT) listed on the Mainboard of the Singapore Exchangesince March 28, 2018. It is the first outlet REIT listed in Asia, with four outlets in China in its initial portfolio. Sasseur REIT’s investment mandate is to invest, directly or indirectly, in a diversified portfolio of income-producing real estate which is used primarily for retail outlet mall purposes, with an initial focus on Asia.
1. How does Sasseur REIT differentiate itself from other retail competitors in China?
Sasseur REIT’s outlet model offers a distinct value proposition by focusing on discounted branded fashion and sportswear, appealing to value-conscious consumers. We manage our brands and tenants through a hands-on, commission-based approach, aligning our interests directly with outlet sales performance.
We employ a “super outlet” model — A × (1+N) × DT × S — to drive success:
A (Art): Unique outlet designs 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 a strawberry farm (Chongqing Bishan outlet), boosting engagement and footfall.
DT (Data technology): Leverages big data to optimise tenant mix and operations.
S (Sustainability): Reflects a commitment to eco-conscious growth and community values.
Additionally, the Entrusted Management Agreement (EMA) model is a key differentiator, ensuring income stability through a fixed component while offering upside via a variable component linked to sales performance.
2. What is Sasseur REIT’s approach in managing its tenants to ensure long-term financial stability and growth?
Sasseur REIT operates on a commission-based rental model, with over 90% of rental income tied to tenants’ sales. This structure closely aligns our interests with theirs, motivating us to actively support their operational performance. We provide guidance on sales strategies, promotional planning, pricing and inventory management. Drawing on deep retail expertise, we also offer insights into consumer behaviour and market trends. In addition, we assist with promotional space, storefront design and brand collaborations for thematic events.
To maintain performance standards, we set clear sales targets upfront and conduct monthly and quarterly performance reviews. When performance falls short, we collaborate closely with the tenant to identify and address issues.
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This performance-driven approach is supported by our deliberately shorter Weighted Average Lease Expiry (WALE), which provides the flexibility needed to adapt quickly and uphold long-term financial stability and growth for the REIT.
3. Sasseur Reit’s DPU reached a peak in FY2021, before moderating slightly in recent years. What factors have been driving DPU trends, and how is the manager planning to grow DPU?
The peak in distribution per unit (DPU) in FY2021 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 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.
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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
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.
5. Can you explain the Entrusted Management Agreement (EMA) model used by Sasseur REIT, and how it benefits investors?
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 the daily operations of the outlet malls in China.
Key benefits of this model are:
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) and 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.
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6. With Sasseur REIT’s revenue concentration from China, how does the company manage currency risks?
Sasseur REIT adopts a prudent, multi-layered approach to managing foreign exchange (FX) risks from its China-based revenue:
Natural hedging via RMB borrowings: Increasing RMB-denominated borrowings creates a natural hedge, aligning revenue and financing costs to reduce FX impact on distributable income.
Structured FX hedging policy: A formal policy hedges between 30%–100% of foreign currency exposure on committed net cash flows. Key elements include forward contracts, where expected repatriated cash flows are locked in three to six months before dividend payments and progressive hedging, where FX exposure is managed on a rolling basis to smooth volatility and stabilise distributions.
Active monitoring and expert guidance: FX trends are closely tracked, with strategies shaped by professional banks and advisors based on market conditions.
In particular, we will look to leverage our Sponsor’s strong pipeline, including outlet malls under our Right of First Refusal (ROFR), as well as consider selective third-party assets that the Sasseur Group currently manages. 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.
8. What are some developments that shareholders can expect in the near to medium term?
Sasseur REIT remains committed to delivering stable returns and long-term capital growth. As of Feb 28, 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, execute Asset Enhancement Initiatives (AEIs) and grow our VIP customer base to support tenant sales and income quality.
We are also refreshing tenant configurations by introducing leading brands, replacing underperformers and responding to evolving consumer trends, particularly domestic fashion, youth-focused labels and premium sportswear.
Growing our AUM remains a strategic priority. We will leverage our Sponsor’s network in China to pursue yield-accretive acquisitions, while maintaining a disciplined approach amid a selective credit environment.
We also continue our capital management efforts on diversifying funding, lowering borrowing costs and enhancing hedging strategies to strengthen financial resilience and support future expansion.
9. What key ESG factors are material to Sasseur REIT, and how do they drive long-term value for shareholders?
Sustainability is deeply embedded in Sasseur REIT’s philosophy and operations, in alignment with our Sponsor’s business model: A × (1+N) × DT × S, where S stands for Sustainability. This reflects our commitment to integrating environmental, social and governance (ESG) considerations across all aspects of our business to drive long-term value.
Our outlet business model inherently promotes sustainability by addressing inventory surplus, giving branded goods a second life through outlet retail. This supports a circular economy and reduces waste in the retail value chain.
At the REIT level, we have secured our first Green Loan from OCBC China, underscoring our commitment to responsible capital management, and it aligns with our long-term sustainability goals.
On the asset management front, we are taking active steps to enhance environmental performance. A key Asset Enhancement Initiative (AEI) planned for 2025 involves replacing the cooling system at our Chongqing Liangjiang Outlet with a more energy-efficient and environmentally friendly system.
Looking ahead, we remain committed to upholding high ESG standards, integrating sustainability into our investment decisions and operational strategies.
10. What is Sasseur REIT’s value proposition to shareholders and potential investors? What might the market be overlooking?
Sasseur REIT’s value proposition lies in its resilience, anchored in the unique characteristics of the outlet retail industry, our differentiated operational model and our ability to deliver attractive risk-adjusted total returns.
According to the 2023–2024 China Outlet Industry White Paper, outlet malls are the fastest-growing retail segment in China, with a 10.1% CAGR from 2019 to 2023. Sales are projected to grow 6.1% in 2025 to RMB260 billion ($46.4 billion), outpacing broader retail growth.
Our Sponsor, Sasseur Group, brings deep expertise in outlet operations, enabling us to adapt to evolving market dynamics. This is reinforced by our Entrusted Management Agreement (EMA) model, which combines income stability with upside potential.
Since the IPO to March 28, Sasseur REIT has delivered a 48.9% total return, outperforming the FTSE ST REIT Index’s 18%. Even during Covid-19, we maintained a stable DPU. As of March, our gearing ratio is a low 25.9%, yet we offer a distribution yield above 8%, underscoring our strong investment value.
10 in 10 – 10 Questions in 10 Minutes with SGX-listed companies
Designed to be a short read, 10 in 10 provides insights into SGX-listed companies. Through these Q&As, management will discuss current business objectives, key revenue drivers and the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials. This report contains factual commentary from the company’s management and is based on publicly announced information from the company. For more, visit sgx.com/research. For more company information, visit www.sasseurreit.com.
Raphael Lim is an associate director of research and FinLit at the Singapore Exchange Group
