Here’s How CapitaLand Mall Trust is Positioned for the Future

CapitaLand Mall Trust (SGX: C38U) has come a long way since its initial public offering in 2002 as Singapore’s first ever real estate investment trust, delivering increasing distributable income over the years.

Investors, though, may want to know if the REIT is able to continue its run in the future. In other words, what is CapitaLand Mall Trust doing to secure its future?

There were a few key points made by Wilson Tan, the chief executive of CapitaLand Mall Trust’s manager, in a recent briefing for the REIT’s earnings for the fourth-quarter of 2015.

First, he spent some time to highlight decisions that the REIT has made in the past which are showing benefits today:

“I think it is also important to note that, in many things that we have done, we seem to be counter-intuitive and counter the business-cycle itself.

I remember a few years ago when we talked about us going out to have a fixed rate bonds – the question was why are you guys going out for fixed rate bonds? When with flexible rate, you guys will have a lot more leeway in terms of interest. And we were very, very focused on the fact that we want to push all our borrowings – our refinancing – down to a certain level, and we want to push it through to the right. Today, in 2027, we do have debt going in that area.

Today’s terms, if you look at the market right now, and I don’t speak for the competition, the competitors out there, y’all can do the analysis, you would say that they are now riding on the fact that they want to go out and get more fixed terms. That’s basically the view that – hey, perhaps in the madness that CMT [CapitaLand Mall Trust] went through the last few years – there is some logic in that. We executed it, we made it happen and we were able to push all our refinancing to a certain level every year, and we were able to push it to the right.”

Second, Tan also shared his thoughts on how CapitaLand Mall Trust is looking at today’s debt environment. Its actions here may be important when it comes to the ability to maintain future distributions:

“Today, from a refinancing standpoint, we are looking at floating rates. And that seems counter-intuitive. Why do you want to go about doing so?

Well, precisely because the market is going to fluctuate a quite fair bit. We feel that we have the opportunity for us to take shorter tenure, giving us a little bit more flexibility if the market moves in our favor, from a swap rate standpoint, from an interest rate standpoint, we will take that opportunity to do a bond. A long term bond. And that’s basically what we do.”

Third, Tan had highlighted the amount of asset enhancement initiatives that CapitaLand Mall Trust is undertaking:

“The market is going through a very difficult time. But over the last two years, if you see what we have been doing, we have actually spent more money on asset enhancement than many of the other [REITs] doing in the market. We have gone out do thing at Tampines Mall, at IMM, and now at Plaza Singapura, at Clarke Quay. In a sense, it does seem like we are throwing money into assets that – hey guys, what are you trying to do, you know?

But then again, recognize we are going through a restructuring in terms of the economy, if we do not repurpose, if we don’t go out and make the changes in our assets itself, when the economy turns, that’s where we may miss it. We may not be ready. And that’s why we went out and do that.”

It is heartening to know that CapitaLand Mall Trust’s management team are thinking beyond short-term outlooks and are looking out over the longer-term on what needs to be done. But, we will have to see whether its actions will pay off in the future.

To keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.