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3 Things To Know About CapitaLand Retail China Trust

CapitaLand Retail China Trust (SGX: AU8U) or CRCT is a Singapore-based Real Estate Investment Trust (“REIT”) that invests in a diversified portfolio of income-producing retail real estate in China for the long term.

The trust’s shopping malls are located in seven Chinese cities, namely Beijing, Sichuan, Henan, Shanghai, Wuhan, Hubei and Inner Mongolia. As at 31 December 2015, the trust’s properties are valued at RMB 10.91 billion.

Here are three things we should know about the trust.

Track record since IPO

One of the most important criteria for evaluating a REIT is to look at its long-term net property income (NPI) and distribution per unit (DPU) trends. Ideally, we want both metrics to grow sustainably.

crctnpi

Here, we see that NPI is up by 14.9% compounded, whereas DPI is up by 5.9% compounded.

Diversified tenant base

One of the main criteria that investors should look at when assessing the sustainability of a REIT’s income is the diversity of its customer based.

A diversified customer base means that the REIT’s income is less likely to be affected by a particular customer or group of customers.

crctrent Source – company’s investor presentation

Despite having a diverse group of tenants, CRCT is still exposed to concentration risk in one particular sector, namely, the retail market. As such, a weaker retail environment could have a significant impact on rentals.

Moreover, given that China has one of the most advanced online/mobile commerce platforms in the world, this long term trend could have an impact on the long-term rental of the retail market. This risk cannot be diversified away.

Occupancy rate

Occupancy rate is an important metrics since this measures the strength of the market demand for a REIT’s property.

As at 30 September 2016, overall portfolio occupancy level stood at 95.2%. The rate has been improving in the last few quarters. See below:

crctmix

Source – company’s investor presentation

As we can see, the overall occupancy rates have improved from 94.8% to 95.2% in the past 4 quarters.

Conclusion:

The above is just a quick glimpse into a few things that will give investors an overview of this trust.

Investors who find the above interesting may want to explore further before committing any capital.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.