Cambridge Industrial Trust Distribution Drops

Cambridge Industrial Trust (SGX: J91U) has announced its full-year results for the year ending 31 Dec 2015.

The real estate investment trust owns 51 properties around Singapore. The properties have a carrying value of approximately S$1.4 billion and a total gross floor area of approximately 8.5 million square feet.

The industrial trust saw its revenues for the year come in at S$112.2 million, up 13% from 2014. The good news came from higher rents and maintaining its portfolio occupancy, despite the soft economy.

Consequently, Net Property Income (NPI) rose to S$86.2 million for the year, up 10.7%. The higher NPI, however, did not do much for the distributions to unitholders. Distribution per unit (DPU) for year 2015 was only 4.793 cents, down 7.2% from 5.004 cents per share.

The low DPU was due to higher borrowing cost and lower capital distribution. Borrowing cost swelled by 26.1%, while capital gains distribution was reduced by 61.4% to only S$2.1 million for 2015.

It is worth noting also that the property managers were paid S$4.74 million, 19.7% higher this year despite the lower DPU.

Gearing at the company remains at stable at 36.9%, compared to 36.4% at the start of year. Even though gearing was up from last year, Cambridge Industrial Trust eased concerns of investors by refinancing part of its debt. Weighted Average debt expiry is now 3.2 years, compared to just 2.24 years in 2014.

There are no refinancing needs until 2017. Additionally, 97% of interest rate exposure is also fixed for next 3 years.

Net Asset Value (NAV) is a good metric to estimate the underlying value of the REIT. Unfortunately for Cambridge Industrial Trust, NAV was down to 67.3 cents per unit from 68.1 cents a year back. The decline in NAV was largely due to dilution of units issued for acquisition earlier in the year.

Occupational highlights

Weighted Average Lease Expiry (WALE) remained steady at 3.8 years. Portfolio occupancy however continued to slide, down to 94.3 percent from 97% in the previous year.

In the earnings release, Cambridge Industrial Trust highlighted the acquisition for the year. The Trust acquired the remaining 40% interest in Cambridge SPV1 in Tuas, South Avenue 4, with the primary purpose of warehousing and manufacturing. Cambridge Industrial trust also acquired a factory at 160A GUI Circle in May.

Cambridge Industrial Trust also spent S$13.9 million enhancing two assets, namely, 31 Changi South Avenue 2 and 3 Pioneer Sector 3. Asset enhancing initiatives will continue to be the focus of the management for 2016 to improve net income for 2016.

Looking ahead, the management warns of weaker economic outlook. It also said properties will be converted from single tenancy to multi-tenancy. Lower portfolio occupancy and net income could be expected for the coming year.

The trust has served its unitholders well, with both its acquisitions and revenue growth. Hopefully they will soon start to improve its distribution per unit to its unitholders as well.

Foolish summary

At its closing price of S$0.530, Cambridge Industrial Trust trades at a price-to-book ratio of 0.79 times. It has a of 9%, thanks to an annual dividend of $0.04793 per unit.

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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, Wilson Ong, doesn’t own shares in any companies mentioned.