On February 21, 2024, Sasseur REIT ("Sasseur REIT") announced its 2023 annual results.
Sand Boat REIT isThe first real estate trust** (REIT) in China to hold outlet projects as its main business, which is theIt was listed on the Singapore ** Stock Exchange in March 2018
The sponsor of the REIT is Chongqing Sand Ship Group, which is a leading large-scale chain outlet operator in ChinaIt operates 17 large outlets, of which 2 properties are owned by the Sand Ship Group, 4 are held by the Sand Ship REIT, and 11 properties are held by third parties(i.e., asset-light model).
This time, we will combine the 2023 annual report of Sand Boat REIT to sort out the operation mode and performance of Sand Boat REIT, as well as the main characteristics of the domestic outlet industry.
1.Overview of the Sand Ship Group
Sand Ship Group is a leading large-scale chain outlet operator in ChinaFounded in 1989, in 2016, it pioneered the business concept of "Art Business, Super Outlet"., with self-createdA*(1+N)*DT business modelStarted the journey of outlet business and became a leading outlet brand in Asia. 
Commercial layoutIn terms of the end of 2023, the Sand Ship Group is inSouthwestRegion (Chongqing, Kunming, Guiyang),Yangtze River Delta(Hangzhou, Nanjing, Hefei, Suzhou, Yangzhou, Shanghai).South China(Changsha, Guangzhou, Shenzhen),Southeast(Fuzhou, Xiamen),Northwest(Xi'an, Lanzhou, Urumqi, Yinchuan),North China(Shijiazhuang),Northeast(Changchun) a total of 20 municipalities directly under the central government, provincial capitals or high-speed development cities signed contracts22 large outletsProject.
Among them,17 outlets have already opened, in additionUrumqi Outlets will open in September 2024。ContractedThe reserve projects also include Guangzhou, Shenzhen, Shanghai and Yinchuan projects。can be found that sandThe project is ready to be landed in first-tier cities in China
The group is currently in operation17 outlets projects, with total sales of 17.2 billion yuan in 2023, a year-on-year increase of 438%It has about 13 million VIP members and nearly 5,000 cooperative brands. 
Source**: Company announcement.
In terms of business model,Sand Ship Group is positioned as "art business, super outlets, and its business model is: a * 1 + n) * dt = super outlets = offline social ecosystem with outlets as the cornerstone, among them, art = art, that is, in the design and display of outlets,Integrate art and commerce, and connect the unique theme of Ole with the consumer's sense of advancement, so that consumers can enjoy the cultural history and experience of the outlets.
1=Traditional outlets; n = new offline social ecosystem layout, including super children's hall, super sports hall, super farm, ......Focusing on health, entertainment, culture and other content that meets the trend of middle-class consumption and social needs. That is, to add more experiential and social elements to the outlet
dt = Big Data Precision Marketing,The group has built a VIP membership system and integrated online and offline operation systems, in-depth analysis of consumer data to provide accurate services for the company's sales and operations. 
Source**: Company announcement.
2.Basic information of the Sand Boat REIT
Sand Boat REIT isAsia's first Singapore-listed REIT owned and operated by outlets, REIT has 4 outlet properties located in China, namely:Chongqing Liangjiang Project, Chongqing Bishan Project, Hefei Project, Kunming Project, with a total construction area of 37770,000 square meters, leasable area of 31020,000 square meters
Among them,Hefei project area is the largest, with a construction area of 14730,000 square meters; The Chongqing Liangjiang project was the first to open in 2008 and has been in operation for 16 years
Source**: Company announcement.
About the business model of the Sand Boat REIT,Sand Ship REIT and the promoter, Sand Ship GroupA delegated management agreement was signed(Entrusted Management Agreement, EMA). The Entrusted Management Agreement (EMA) model signed by Sand Boat REIT includes fixed income (fixed component) and variable income (variable component), namely:The promoter, Sand Ship Group, provides a guaranteed income as well as a variable income for Sand Ship REIT
A schematic diagram of the business model of Sand Boat REIT is shown below:
Source**: Company announcement.
First of all, Sand Ship Group receives 10-16% of the retail sales of its outlets as total commission income.
The fixed income collected by the Sand Ship REIT is paid by the Sand Ship Groupand an annual growth rate of 3%;
Collected by the Sand Boat REITVariable income, an additional 4-5% of the sales volume of each outlet project is withdrawn as this part of the variable income, so that Sand Boat REIT can participate in the sales performance of each outlet project under the REIT**.
If deductedFixed income, variable income received by Sand Boat REIT, as wellIn addition to the management fee charged by the administrator, there is still a leftover, thenThe remaining 60% will be collected by the manager and 40% will be paid to the REIT
Under this model, the trustee bears all operating expenses related to the operation of all outlet projects. At the same time,The manager bears the risk of uncertainty in the operation of the project and the risk of income fluctuations, while the Sand Boat REIT is relatively safe in drought and flood
3.Sand Boat REIT 2023 results: payout ratio 91%, well above the market benchmark
IncomeAspect: In 2023, Sand Boat REITThe total revenue was 65.9 billion yuan, an increase of 10 percent year-on-year7%。Among them,Fixed portion income 44.8 billion yuan, a year-on-year increase of 3%; Variable portion income 21.1 billion yuan, an increase of 31 percent year-on-year7%, mainly due to a significant increase in sales
Source**: Company announcement.
SalesDimensions: 2023,Four outlet projects achieved sales of 466.4 billion yuan, a year-on-year increase of 319%, reaching 99% of sales in 20196%。Among them, the sales of the Chongqing Liangjiang project reached the highest point since its listing.
From the point of view of sales efficiency,The sales efficiency of Chongqing Liangjiang project reached 4990,000 square meters per year, while the sales efficiency of the other three projects is less than 10,000 yuanThe Chongqing Liangjiang Project is the most advantageous project of the Sand Boat REIT. 
Source**: Company announcement.
Occupancy rateDimensions: End of 2023,The overall occupancy rate of the REIT was 976%, exceeding the pre-pandemic occupancy rate of 935%。Among them,The occupancy rate of the Chongqing Liangjiang project has been stable at 100%, reflecting its strong attraction to tenants。The other three projects also basically reached the highest occupancy level since the pandemic. 
Source**: Company announcement.
fromNumber of membersLook: In the past five years, the number of VIP members of the REIT's projects has continued to increase, from 1.59 million in 2019 to 3.53 million, a cumulative increase of 122%. 
Source**: Company announcement.
As more and more people are willing to go to the outlets, REIT has gained more new members. Membership sales account for more than 60% of the total REIT sales. 
Source**: Company announcement.
fromValuationLook: 4 outlets with a total construction area of 37770,000 square meters, leasable area of about 31020,000 square metersThe total valuation is 849.5 billion RMBFrom the perspective of property unit price, Chongqing Liangjiang project has the highest unit price, 4260,000 square meters; The unit price of the other three projects is in the range of 1-20,000 square meters
Source**: Company announcement.
fromTenant mix of formatsLook: In 2023, calculated according to the proportion of income, the top 5 business formats of the 4 REIT projects areDomestic fashion brands, international brands, sports, children's clothing, footwear and leather products, the proportion of revenue is respectively. 5%。The top 10 tenants accounted for 144%。
Source**: Company announcement.
fromLeasesWeighted average maturity period(wale) look: the tenants of the REITThe weighted average maturity period is 21 year (based on leasable area), 12 years (as a percentage of revenue.)）。Among the tenants of the REIT,61.6% of tenants expire in 2024(as a percentage of revenue).
Sand Boat REIT is committed to signing short-term leases to optimize the tenant mix to adapt to the rapidly changing needs of Chinese consumers; and providing flexibility for emerging and successful brands to replace underperforming brand tenants.
Source**: Company announcement.
Annualized distribution rateDimensions: 2023,The REIT's distribution earnings per share (DPU) was 6249 new points, down 46%, mainly due to the 7% depreciation of the RMB against the SGD in '23 and the increase in finance costsCauses.
According to the end of 2023, the ** price is 0S$685 per share,The 23-year cash distribution ratio of Sand Boat REIT is 9.1%, well above comparable performance benchmarks(as shown in the figure below).
Source**: Company announcement.
4.The main characteristics of the domestic outlet industry
The good operating performance of Sand Boat REIT is mainly due to the rapid development of the domestic outlet industry. Let's take a look at the development of the domestic outlet industry.
1.Outlet industry profile
Outlets, in retail business, refers to a shopping mall composed of stores that sell goods such as out-of-season, off the shelves, and broken codes, and is also known as a "brand outlet shopping center". The outlet format was born in the United States in the 70s of the 20th century, and the digestion of inventory adopted by brand owners in the face of inventory pressure provided a commodity basis for the development of outlets.
With the increase in the demand of middle-income people for cost-effective consumption, outlets have gradually become one of the mainstream and mature commercial formats in the world, and leading outlets operators such as Simon Real Estate and Arthur Gran Group have emerged, among which Simon has been operating outlets for 20 years, and Arthur Gran has been operating outlets for nearly 30 years, and the outlets as a whole have strong vitality.
In the country,Beijing Lufthansa Outlets opened in 2002 and is the first outlet project in China。After more than 20 years of development, the outlet format has become an important subdivision of China's retail industryWith the characteristics of "famous products + discounts + experience", we have created a "cost-effective model".Differentiate from other retail formats.
2.The scale of the domestic outlet industry
According to the statistics of the Outlet Industry Development Working Committee of the China Department Store Commerce Association, as ofAt the end of 2022, there were 226 outlet projects with a construction area of more than 30,000 square meters in operation across the country, with a total construction area of 2,07150,000 square meters, with annual sales of about 210 billion yuan。In 2022, 23 new outlets were opened, and the number of stores increased by 11%. However, compared with thousands of department stores and shopping malls, outlets are still in the "blue ocean stage" in China.
3.The domestic outlet industry is growing rapidly
In 2022, the growth of various formats of China's retail industry will be greatly differentiated, and in terms of optional consumption, department stores will be affected by factors such as store closures, and sales will decline significantly; However, the outlets have risen significantlyIn 2022, the growth rate was 8%, ranking first among all retail formats(as shown in the image below), thisIt is related to the characteristics of the outlets to resist risks, the discount attributes of the outlets, and the domestic consumers' pursuit of "high cost performance".
Source**: China Department Store Industry Association.
4.Outlet development model
Domestic outlets show a trend of rapid development, which is not only reflected in the growth of the number and scale of stores, but also in the innovation of business formats. Outlets tooIt is developing in multiple directions such as experiential, themed, and social。At present, the outlets in the first-tier cities have basically become saturated, and the competition in the outlet market will be mainly concentrated in the second- and third-tier cities in the future. The development of domestic outlets has mainly experienced the evolution of the following types of models:
(a) Traditional Ole model:
It is generally located in the suburbs of the city and emerging development areas, and the volume is large. The project is mainly in the form of an open block, providing a comfortable shopping environment, selling goods such as out-of-season, off the shelves, and broken codes of well-known brands at home and abroad at discounts, focusing on retail, supplemented by catering, experience formats, etc.
(b) Urban Outlet Model:
At present, most of the urban outlet projects in China are department store projects under department store groups, and the location is generally located in the urban area, which is quite different from the suburbs in the traditional sense. City Outlet ProjectMost of the brands settled in are discount stores with their own brand resources, and most of them are leisure sports brands and men's and women's clothingetc,The overall brand grade is lower than that of traditional outlets. For example, Wangfujing UP Town, located in the South Fourth Ring Road, belongs to this category.
(c) "Outlet + X" mode
Outlets+x", "x" represents a featured resource. The comprehensive model of "outlets+x" is a comprehensive development integrating commerce, industry, tourism and other formats, with outlets as the main body to achieve coordinated development of business and industry. For example, Beijing Badaling Outlet, combined with the Badaling Great Wall Tourist Area, belongs to this category.
5.Outlet operating model
Outlet operating modelMost of them are mainly joint ventures, supplemented by leasing. The joint operation model adopts a unified cashier methodAfter the operator obtains the revenue according to the agreed sales sharing ratio and other cooperation conditions, the remaining part will be returned to the merchant.
6.Outlet location and customer group analysis
Traditional outlets are generally kept at a distance from the brand's regular-priced storesThe main choice is near the highway or the main road of the city. It is about 30-50 minutes drive from the city centerIt is generally required to have a population of about 2 million within a 40-minute drive and about 4 million people within a 90-minute drive。In recent years, the proximity to rail transit stations has gradually become a new trend in the location of outlets.
OleThe customer group is generally customers who pursue higher cost performance and have a higher brand awareness。This type of customerUsually, the frequency of shopping at outlets is 2-4 times a year, and the stay time of each shopping stay is usually about 3-5 hours or more
7.Outlet project scale
Since the location of outlets is generally not in the city center, and it is about 30-50 minutes by car from the city center, it needs to have enough volume to carry more brands and formats to enhance the shopping experience and maintain customer stickiness. The construction area or business area of major outlets in China is mainly concentrated between 6-120,000 square meters, which is equivalent to the volume of a medium-sized or large shopping center
8.The anti-risk properties of outlets
1) The outlets format has a good "anti-cyclical" characteristic
From the perspective of the development history of outlets, outlets can alleviate the inventory pressure of brand owners during the economic downturn by virtue of the business model of "famous products + discounts". From a domestic point of view,In the past three years, various retail formats have been affected to varying degrees, but the performance of the outlet format has continued to be strong, with the annual growth rate ranking first among major retail formats, which is due to the anti-cyclical nature of outlets, which is able to remain relatively stable in times of economic and retail market downturns. In the past three years, the changes in the domestic economic environment have made great changes in consumers' purchasing behavior and consumption habits, and "cost performance" has become the most important consideration
Source**: China Department Store Industry Association.
2) The outlet business can effectively cope with the impact of e-commerce
As an online sales platform, e-commerce has a certain impact on traditional commerce due to its rich categories and shopping convenience. The outlet category is mainly clothing and apparel, with large differences in style, version, color and size, which are closely related to the personalized needs of consumers. Ole has the characteristics of "visible, tangible, tasting, strong service, heavy experience, and low refund", forming differentiated competition with e-commerce。In addition, the outlets havePerennial discount advantage, and with social attributes and ** security advantages, which can effectively deal with the impact of e-commerce.
3) The specific performance of the social attributes of the outlets
The social attribute is one of the important characteristics of the outlets, the outlets projectIt often attracts young people and families with micro-vacations and social needs with a unique open street shopping environment, supplemented by leisure and entertainment facilities and characteristic outdoor atmosphere activities
If there is a feature of "European style + low density + open architectural space", in addition to meeting the catering and leisure and entertainment formats equipped with general shopping malls, it can also provide conditions for holding outdoor activities such as lawn meetings, open-air film festivals, drone shows, fireworks shows, wedding photography, etc., which is in line with the new scene of "social + consumption" that young people pursue relaxed and natural.
Some are equipped with children's playgrounds, trampolines, archery, Internet celebrity check-in points, cinemas and other entertainment facilities to attract customers to stay for time, increase the interactive experience with customers, and create a one-stop family micro-vacation experience that integrates shopping, leisure and entertainment, parent-child interaction and other needs, and further attract parent-child family customers.
9.The future development trend of the domestic outlet industry
According to McKinsey Research,The market size of the domestic outlet industry is expected to increase by 86% from 210 billion yuan in 2022 to 390 billion yuan in 2025
McKinsey arguesConsumers will not necessarily switch to cheaper brands, but will find ways to buy more cost-effective goods at a lower cost through different platforms, campaigns, or by adjusting the purchase quantity or package size。And outlets provide such a choice for consumers who are "more and more savvy and pursuing cost-effectiveness".
It can be seen that the Sand Boat Outlets is in line with the development law of the outlet industry, for example, by adding experience, social and artistic elements in the outlet project, plus cost-effective famous discount stores, providing a one-stop micro-vacation communication experience for young people and families, forming its own strong attraction, and relying on its own business experience for many years, so as to achieve a stable improvement of various business indicators. -end-