CapitaLand Commercial Trust (SGX: C61U) is one of the cool companies and trusts in Singapore that shares webcasts and/or transcripts of their earnings presentations. About a month ago in July, CapitaLand Commercial Trust released its results for the second-quarter and first-half of 2016. I had spent time going through the webcast of the earnings presentation and took down six things that may interest investors. But first, here’s a quick background on CapitaLand Commercial Trust. It is one of the largest commercial real estate investment trusts in Singapore by market capitalisation and it is managed and sponsored by CapitaLand Limited (SGX: C31). The REIT…
About a month ago in July, CapitaLand Commercial Trust released its results for the second-quarter and first-half of 2016. I had spent time going through the webcast of the earnings presentation and took down six things that may interest investors.
But first, here’s a quick background on CapitaLand Commercial Trust. It is one of the largest commercial real estate investment trusts in Singapore by market capitalisation and it is managed and sponsored by CapitaLand Limited (SGX: C31).
The REIT owns properties such as Capital Tower, Six Battery Road and Bugis Village. It also has partial stakes in Raffles City Singapore as well as a 17.7% stake in MRCB-Quill REIT in Malaysia. All told, CapitaLand Commercial Trust has 10 properties in its portfolio.
With that, here are my notes:
- Lynette Leong, the REIT manager’s chief executive, kicked off the briefing with a summary of the quarter’s results. Leong said that CapitaLand Commercial Trust’s DPU (distribution per unit) growth was pleasing as it was achieved despite headwinds in the office market.
- Another highlight was unitholders’ approval for CapitaLand Commercial Trust to acquire the remaining 60% interest in the commercial development CapitaGreen. The REIT currently has a 40% stake in the property. The agreed market value was around S$1.6 billion.
- CapitaLand Commercial Trust’s deposited properties were valued at $7.8 billion as of 30 June 2016. Leong said that this figure will rise to $8.4 billion upon the completion of the full acquisition of CapitaGreen. The acquisition is expected to be completed in the third-quarter this year. Capitaland Commercial Trust’s debt gearing is also expected to rise to 37.7% after the acquisition. It is currently just below 30%.
- CapitaLand Commercial Trust reported a slight dip in revenue for the second-quarter of 2016. Leong said that One George Street and Capital Tower had lower occupancy, resulting in lower revenue. She added that much of the open space in the two properties have since been backfilled or are in advanced negotiations. CapitaLand Commercial Trust has an overall occupancy rate of 97.2%, which is above the occupancy rate of 95.1% for the Grade A office market in Singapore.
- Leong felt that the REIT’s underlying property valuations are fairly conservative. She cited the example of HSBC Building which is a freehold property with a capital value of S$2,270 per square feet (psf). As a comparison, Leong said that the Straits Building was sold at S$3,5000 psf. Leong felt confident that the valuations for the REIT’s properties will remain stable despite the headwinds in the market. As a side note, Leong also said that CapitaLand Commercial Trust is required to change valuers every two years.
- Leong noted that CapitaLand Commercial Trust has the highest credit rating among the commercial REITs in Singapore. She also highlighted that the REIT has an average cost of debt of 2.5%, but this is expected to increase slightly after the CapitaGreen acquisition.
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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 Chin Hui Leong doesn’t own shares in any companies mentioned.