CapitaLand Commercial Trust’s 2016 Year in Review: 3 Key Slides to Sum Up the Year

CapitaLand Commercial Trust  (SGX: C61U) will be reporting its 2017 first quarter earnings on Wednesday.

Before we get there, it might be worthwhile to take a quick look at what transpired in 2016 for CapitaLand Commercial Trust. As a brief background, CapitaLand Commercial Trust is a real estate investment trust (REIT) that has stakes in 10 prime commercial properties in Singapore.

In its 2016 fourth quarter earnings briefing, Lynette Leong, the chief executive of the REIT’s manager, highlighted three slides that summed up its year.

Distribution growth

CapitaLand Commercial Trust’s distribution per unit (DPU) grew from 8.62 cents in 2015 to 9.08 cents in 2016.

2017-04-14 CapitaLand Commercial Trust DPU
Source: CapitaLand Commercial Trust earnings presentation

Leong said that the REIT’s DPU growth in 2016 was in large part due to the acquisition of a remaining 60% stake in CapitaGreen (prior to the acquisition, CapitaGreen was 40%-owned by the REIT). She also noted that the occupancy within CapitaGreen improved as well, adding to the performance:

“This is a result of thanks to our team’s great efforts as well, is largely due to the income contribution from CapitaGreen that we acquired while 60% of that that we acquired in August last year and that’s largely due to that, but it also — it also was caused by an increase in revenue occupancy in CapitaGreen itself.

So not only did the actual 60% of CapitaGreen contribute to the improved earnings, CapitaGreen‘s performance also added onto the revenue.”

CapitaGreen accounted for 85% of CapitaLand Commercial Trust’s DPU improvement. The rest of the 15% came from other parts of the REIT, including its 60% stake in Raffles City.

Weathering the storm

2017-04-14 CapitaLand Commercial Trust Occupancy
Source: CapitaLand Commercial Trust earnings presentation

The addition of new office supply in Singapore was significant in 2016 and this has put office rentals under pressure. Despite the environment, CapitaLand Commercial Trust was able to hold its ground. Leong noted:

“We have continued to experience very resilient committed occupancy in our portfolio. Our — as at the end of December 2016, the portfolio committed occupancy was 97.1% versus the market of 95.8%.”

Leong also pointed out that CapitaLand Commercial Trust does not have many leases coming due in 2017. She noted that the REIT’s tenant retention ratio for new and renewal leases had declined from 83% in 2015 to 62% in 2016. But, there was one specific reason behind it:

“The tenant retention ratio dropped to 62% from the previous year’s 83%. This is largely due to a few factors. One was that we had a major tenant, Royal Bank of Scotland, that unfortunately vacated and they had to leave Singapore altogether.”

Broadening the base

Leong also provided more insight on how CapitaLand Commercial Trust’s tenant profile changed from 2015 to 2016.

2017-04-14 CapitaLand Commercial Trust Tenants
Source: CapitaLand Commercial Trust earnings presentation

The slide above compares the new leases signed in 2015 and 2016. Leong said:

“So to give us some color as to what kind of tenants came to our portfolio, these are the new leases that came in. The majority came from the business consultancy IT media and telecommunications sector. Then the next came banking, insurance and financial services and then retail products and services and that’s largely in Raffles City.”

With that, let’s see what 2017’s first quarter will bring for CapitaLand Commercial Trust.

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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.