CapitaCommercial Trust Grows Its Distributions

CapitaCommercial Trust (SGX: C61U), Singapore’s first publicly-listed commercial property real estate investment trust, owns many of Singapore’s well-known commercial buildings such as HSBC Building, Capital Tower, and Raffles City Singapore. It is sponsored, partially-owned, and managed by CapitaLand (SGX: C31), the largest property developer in South East Asia.

Operating Result

CapitaCommercial Trust announced its first quarter results yesterday and managed to post an overall improvement. Gross revenue for the quarter grew by 3.2% year-on-year to S$64 million while distributable income increased by 7.6% to S$59.9 million. This led to a 7.2% growth in distribution per unit to 2.08 cents.

During the quarter, all of CapitaCommercial Trust’s properties were able to raise their rents expect for One George Street which saw a 20% drop in its first quarter revenue due to the termination of income coming from yield-protection (otherwise known as income support) since the middle of 2013.

CapitaCommercial Trust’s balance sheet stayed relatively stable, with gearing increasing by a little from 29.3% as of the last quarter of 2013 to 30.0% currently. Most of the REIT’s debts (some 81% of its total debt load) have fixed interest rates and have an average maturity of 3.7 years left. The fixed interest rates provide some form of stability for the REIT’s interest expenses and can help lower some of the risks associated with a possible increase in the overall interest rate environment.

During the quarter, additional debt had to be drawn for the enhancement works for Capital Tower and Raffles City Singapore though there is still room for the REIT to drawn on more debt if it decides on any future acquisitions.

The construction of CapitaGreen is also going according to plan and  should be completed by the end of this year. The trust also holds an option to acquire the remaining 60% stake of CapitaGreen which is currently owned by its joint-venture partner.

The REIT’s occupancy rate for its portfolio had improved along with the general market. The manager expects rental rates to increase in the near future due to the lack of supply of Grade A office space in Singapore and that’s a trend that should be helpful as the trust has about a third of its net leasable area up for renewal in the next two years.

Foolish Summary

From its first quarter distribution per unit of 8.44 cents, the trust currently provides an annualised yield of around 5.2% based on its current price of S$1.635. It can be considered as one of the lowest yielding REITs in the market. However, investors can also get the trust’s potential for growth, as well as good management.

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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 Stanley Lim doesn’t own shares in any companies mentioned.