Cambridge Industrial Trust Manages To Keep Distributions Stable In Latest Quarter

Cambridge Industrial Trust (SGX: J91U), a real estate investment trust which focuses on industrial properties in Singapore, just announced its full year earnings today.

The REIT currently has a portfolio of 49 properties in Singapore that are grouped under four segments, namely, Logistics, Warehousing, Light industrial, and General industrial.

For the quarter ended 30 September 2014, the REIT’s results were pretty stable. Gross revenue grew by 5% year-on-year to S$25 million, leading to a 2.5% increase in distributable amount to S$15.8 million. An increase in the number of units outstanding resulted in the REIT’s distribution per unit (DPU) dipping slightly by 0.1% to 1.25 Singapore cents.

For the nine months ended 30 September 2014, there is a huge difference in the REIT’s results compared to a year ago.

Although gross revenue fell by only 0.1% year-on-year to S$73.1 million, the REIT’s net income before share of profits in jointly-controlled entity of the group had increased by 69.8% to S$37.8 million.

A huge part of the big jump is due to a large decline in performance fees paid to the trust’s Manager. For the first nine months of 2013, Cambridge Industrial Trust’s Manager was paid S$13.9 million in performance fees; the sum had been reduced to S$1.7 million for the first nine months of 2014.

Cambridge Industrial Trust had changed its performance fee structure earlier this year after unit-holders had criticised the REIT Manager’s performance fee for the first half of last year.

New development

During the quarter, Cambridge Industrial Trust had added a new piece of real estate to its portfolio with the successful acquisition of a property located at 12 Ang Mo Kio Street 65 for a total sum of S$39.8 million. The trust has also completed some minor asset enhancement initiatives (AEIs) for its industrial property located at 30 Toh Guan Road.

Currently, the REIT is in the mist of performing AEIs on its properties located at 21B Senoko Loop, 31 Changi South Avenue 2, and 3 Pioneer Sector 3 (Phase II). The three AEIs are expected to cost around S$26.8 million for the REIT in total.

Foolish Takeaway

Cambridge Industrial Trust currently has a gearing ratio of 33.9% with an average interest cost of about 3.66%.  Unit-holders might be happy to see the low gearing and cost of borrowings, but it should be noted though, that the REIT has a large chunk of borrowings (a S$250 million club loan) coming due in 2016 – investors might want to keep an eye on the REIT’s ability to refinance that loan.

In any case, Cambridge Industrial Trust continues to provide a stable yield for investors while employing relatively low gearing. Although the REIT’s Manager’s had been criticised by unit-holders earlier, it seems that the Manager’s board is keen to engage investors given the revamp of the performance fee structure.

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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 does not own any companies mentioned.