3 Things Investors Should Know About CapitaLand Commercial Trust’s Business Now

Credit: Lali Masriera

CapitaLand Commercial Trust (SGX: C61U) is one of the largest commercial real estate investment trusts (REITs) in Singapore by market capitalization. The REIT has ownership (either partial or full stakes) over properties mainly in Singapore, such as Capital Tower, Six Battery Road, Bugis Village,  Raffles City Singapore and more.

Here are three things about CapitaLand Commercial Trust’s business that investors may want to take note of right now:

1. Market-beating occupancy rate

The occupancy rate for a REIT is an important metric to look at since it gauges the strength of the market demand for the REIT’s properties.

Here’s a chart showing the occupancy rates for CapitaLand Commercial Trust (the red line) and the market averages (the green and blue lines), going back to 2004:

Source: CapitaLand Commercial Trust 2017 half year earnings presentation.

Right now, CapitaLand Commercial Trust’s portfolio occupancy rate of 97.6% is significantly higher than the market averages.

There are also two main trends that we can see from the chart.

Firstly, the occupancy rate for CapitaLand Commercial Trust has fluctuated from a low of 93.1% to a high of 99.6% over the past 13 years. In other words, there is volatility in the REIT’s occupancy rate. Secondly, CapitaLand Commercial Trust’s occupancy rate has always been higher than the market averages.

2. A concentrated portfolio

The level of concentration in a REIT’s portfolio in terms of the rental income contributed by its different properties can give investors insight on the level of risk it is facing. The chart below shows the income contributions from its various properties in the first half of 2017:

Source: CapitaLand Commercial Trust 2017 half year earnings presentation.

What’s useful to note here is that the top five properties of CapitaLand Commercial Trust accounted for 83% of its total net property income in the first half of 2017. In other words, the income distribution is fairly concentrated in the REIT’s main properties.

3. Well-diversified tenant mix

The chart below shows the income contributions from CapitaLand Commercial Trust’s tenants, broken down by industries:

Source: CapitaLand Commercial Trust 2017 half year earnings presentation.

We can see that the REIT’s tenants are diversified across a broad range of different industries.This is important since it can help with reducing CapitaLand Commercial Trust’s income volatility over the long term.

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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.