Singapore’s first listed commercial real estate investment trust, CapitaCommercial Trust (SGX: C61U), is one of the many subsidiaries that’s under the corporate umbrella of property group CapitaLand (SGX: C31). The REIT, despite not being a part of the benchmark Straits Times Index (SGX: ^STI) – unlike its corporate cousins CapitaMall Trust (SGX: C38U) and CapitaMalls Asia (SGX: JS8) – still carries a hefty market capitalisation of around S$4.3b. With such strong investor interest, it might be good to dig into the REIT to find out what makes it tick. Here are some important facts from its recent
Singapore’s first listed commercial real estate investment trust, CapitaCommercial Trust (SGX: C61U), is one of the many subsidiaries that’s under the corporate umbrella of property group CapitaLand (SGX: C31).
The REIT, despite not being a part of the benchmark Straits Times Index (SGX: ^STI) – unlike its corporate cousins CapitaMall Trust (SGX: C38U) and CapitaMalls Asia (SGX: JS8) – still carries a hefty market capitalisation of around S$4.3b.
With such strong investor interest, it might be good to dig into the REIT to find out what makes it tick. Here are some important facts from its recent presentation slides for investor meetings in Europe.
1) CapitaCommercial Trust’s portfolio
REITs earn their keep with a simple idea: they own properties and collect rents from tenants. Thus, the real economic value of a REIT would be underpinned by the kinds of properties they own.
Here’s how CCT’s portfolio of Singapore-based commercial porperties stacks up:
|Property||Value (as of 30 June 2013)|
|Six Battery Road||S$1.28b|
|One George Street||S$948m|
|Raffles City (60% interest)||S$1.77b (reflecting CCT’s 60% interest)|
|Golden Shoe Car Park||S$135m|
|CapitaGreen||S$334m (value of land only as property is under construction)|
2) CapitaCommercial Trust’s debt profile
REITs are generally highly-levered entities and CCT is no exception. While it’s not always necessarily a bad situation to see a REIT gorge itself on borrowed money, it can create additional risks for investors, especially when the time comes for the REIT to refinance its loans.
REITs are generally unable to conserve too much cash from their daily operations due to the legal need to pay out at least 90% of its distributable income to unitholders. Thus, old debts can only be repaid with new ones or by raising equity capital from investors.
REITs with a high concentration of debt coming due in a narrow frame of time would then become exposed to risks of the capital or debt markets freezing. It might seem a remote risk, but it is something for investors to note.
Because of that, the debt-maturity profile of a REIT becomes important – ideally, the maturity of a REIT’s various loans would be spread out evenly.
This is how CCT’s debt-maturity profile looks like:
|Debt Load||Due Date|
There’s a large swathe of debt coming due in 2016, but it does not seem too burdensome, especially when compared with the value of CCT’s properties.
3) Average office rent for CCT’s portfolio has been picking up
The chart below shows how the REIT’s average rents have changed since the third quarter of 2010.
Rents (measured in S$-per-square-feet) had dipped by 15% from a high of S$8.73 in Sep 2010 to S$7.39 in June 2012. The good news is, those rents have started to climb back up again and currently stand at S$8.03 psf per month.
4) The REIT’s strong occupancy rates
CCT’s committed occupancy level has always been higher than occupancy-indices compiled by CBRE as well as the Urban Redevelopment Authority. That’s perhaps a testament to the capabilities of the REIT’s manager, a wholly-owned subsidiary of CapitaLand.
Foolish Bottom Line
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.