Capitaland Commercial Trust’s Latest Earnings: DPU Rises 9.6%

CapitaLand Commercial Trust  (SGX:C61U) released its 2017 first quarter earnings this morning.

As a quick background, CapitaLand Commercial Trust, which is managed by CapitaLand Limited (SGX: C31), is one of the largest commercial real estate investment trusts in Singapore by market capitalization. The REIT has 10 commercial properties (all located in Singapore) in its portfolio. Some of them are Capital Tower, Six Battery Road and Raffles City.

You can catch up with the results from the REIT’s last quarter here.

Financial highlights

The following is a quick take on some of CapitaLand Commercial Trust’s latest financial figures:

  1. Gross revenue was $89.5 million in the latest quarter, up a staggering 33.9% compared to the same quarter a year ago.
  2. Net property income (NPI) climbed alongside revenue, recording a 34.3% rise to $69.9 million.
  3. The distribution per unit (DPU) for the reporting quarter was 2.4 cents, a 9.6% increase from the 2.19 cents reported in 2016’s first quarter.
  4. As of 31 December 2016, its portfolio of investment properties were valued at $8.5 billion. The REIT ended the reporting quarter with an adjusted net asset value per unit of $1.72, unchanged from a year ago.

Beyond these, Foolish investors may also want to keep an eye on the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. CapitaLand Commercial Trust’s debt profile is summarised below:

CCT debt profile Q1 2017
Source: CapitaLand Commercial Trust’s earnings presentation

As the table above shows, CapitaLand Commercial Trust’s debt load had increased by around $1 billion compared to a year ago.

As a result, the REIT’s aggregate leverage had increased from 30.1% to 38.1%. At the same time, its interest coverage declined sharply to 4.8 times while the average term to maturity shortened to 3.0 years. CapitaLand Commercial Trust’s unencumbered assets also fell from 100% a year ago to 80% in the reporting quarter.

The majority of the REIT’s loans – 80% to be exact – are currently on fixed interest rates. CapitaLand Commercial Trust has 5% of its loans coming due this year. Foolish investors may want to keep a watchful eye on the REIT’s refinancing activities.

Operational highlights

CapitaLand Commercial Trust ended the reporting quarter with a committed occupancy rate of 97.8%, up from the 97.1% recorded at the end of the previous quarter, but down slightly from the 98.1% seen in the same quarter in 2016.

The REIT’s latest committed occupancy rate of 97.8% is also better than CBRE’s estimate of 95.6% for the occupancy rate for offices in Singapore’s central business district (CDB) core in the first quarter of 2017.

The REIT’s weighted average lease term to expiry was 6.4 years at the end of the reporting quarter, a decline from the 7.3 years seen a year ago.

Lynette Leong, the chief executive officer of CapitaLand Commercial Trust’s Manager, had the following comments to share regarding the REIT’s performance:

“The timely acquisition of the remaining 60.0% interest in CapitaGreen, our award-winning, premium Grade A office building in the heart of Singapore’s financial district, has significantly contributed to CCT’s robust performance this quarter.

It was a notable 9.6% increase in CCT’s distribution per unit year-on-year.

Notwithstanding challenging macroeconomic and office market conditions, CCT’s [CapitaLand Commercial Trust] committed occupancy rate of 97.8% as at end March 2017 remains high and well above the market occupancy rate of 95.6%. About 80% of the Trust’s borrowings are pegged at fixed rates, which offer greater certainty of interest expense in a rising interest rate environment.”

In the second quarter of 2016, CapitaLand Commercial Trust submitted plans to redevelop Golden Shoe Car Park. The REIT reported that it has received provisional permission from Singapore’s Urban Redevelopment Authority (URA).

The next step in the process will be to obtain the differential premium (DP) payable for the potential enhancement of the land use. With the information on the DP, CapitaLand Commercial Trust will complete its feasibility study and decide whether to proceed with the redevelopment.


The REIT also provided a brief outlook for its portfolio and Singapore’s CBD office rental market:

“Singapore’s office market remains challenging in 2017. The impending completion of new office developments together with the increase in secondary stock from which tenants vacate and move to the new developments will continue to exert downward pressure on office market rents.

The net property income of some properties in CCT’s portfolio are expected to soften in the later part of 2017 as more renewals and new leases are committed below expiring rents.”

CapitaLand Commercial Trust’s units traded at $1.63 each at the opening gong today. This translates to a historical price-to-book ratio of 0.95 and a trailing distribution yield of 5.7%.

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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.