REFURBISHMENT CONSIDERATIONS OF RETAIL PROPERTIES: A STUDY OF CAPITAMALL TRUST

Abstract

The favourable and robust economy in Singapore has encouraged steady growth in the retail sector in recent years. As consumerism culture evolves in great dimensions over the years, shopping malls in Singapore are seeing frequent and radical transformations to engage the consumers and keep abreast with the retail trends. This dissertation focuses on CapitaMall Trust’s (CMT) shopping malls in Singapore, and attempts to investigate, explain and understand the considerations and justifications of the refurbishment efforts of its malls. The information and data used is from 2002 to 2006, which effectively cover the Trust’s performance and operations from its Initial Public Offering (IPO) to 2006. The refurbishment cycles of other REITs namely Japan Retail Fund Investment REIT, Ascendas REIT and CapitaCommercial Trust, will be taken as comparison to bring out certain trends and juxtaposed against CMT’s considerations and decisions. CMT properties underwent intensive and large-scale asset enhancement works that meet the needs and growth of the retail property and market. On the other hand, properties under the other 3 REITs had hardly any enhancement work for the time period of comparison. Hence the findings implied the strong dependency of retail REIT‘s growth and sustainability on refurbishment cycles as compared to other REIT or property types. Examination of the details of refurbishment works against retail management concepts also reveals a new perspective on the assessment of mall management efficiency. While financial excellence is achieved, some refurbishment decisions may be signalling an alert on long-term desirability, with the ‘edge’ in the malls being diluted by some mold-casting strategies.