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CapitaLand Commercial Trust’s 2018 Third Quarter Earnings: Distribution Grows By 9%

This morning, CapitaLand Commercial Trust (SGX: C61U) announced its financial results for the third quarter of 2018. As a quick introduction for context later, CapitaLand Commercial Trust is Singapore’s first and largest commercial real estate investment trust (REIT). Its portfolio currently comprises nine office properties in Singapore, and one in Frankfurt, Germany, which was acquired in June 2018.

Let’s look at some key takeaways from the REIT’s latest earnings update:

1. Gross revenue for the reporting quarter climbed 35.6% year-on-year to S$100.5 million while net property income (NPI) improved by 37.3% to S$80.4 million. The excellent performance was mainly due to the acquisitions of Asia Square Tower 2 and Gallileo (the German property), which more than offset the loss of income from the sale of Wilkie Edge and Twenty Anson.

2. Distributable income increased by 13.1% to S$82.7 million, while the REIT’s distribution per unit (DPU) rose 8.9% from 2.02 Singapore cents a year ago to 2.20 Singapore cents.

3. For the first nine months of 2018, CapitaLand Commercial Trust’s gross revenue, NPI, and distributable income grew by 17.4%, 19.2%, and 11.6% respectively. However, the REIT’s DPU dipped by 1.5% to 6.48 Singapore cents.

4. As of 30 September 2018, the REIT had a net asset value per unit of S$1.81, down from S$1.84 a year ago.

5. The REIT’s gearing ratio at the end of the reporting quarter was 35.3%, an improvement from the self-same figure of 37.9% seen at the end of 2018’s second quarter. But, one year ago, the gearing ratio was lower at 33.9%.

6. Committed occupancy for CapitaLand Commercial Trust’s Singapore portfolio, as of 30 September 2018, was 99.1%, well above the market occupancy rate of 94.6%. The REIT’s overall portfolio — including Galileo –– had a healthy occupancy rate of 99.2%.

7. During 2018’s third quarter, the REIT signed around 448,000 square feet of new and renewed leases. 27% of those leases were new.

8. Looking ahead, CapitaLand Commercial Trust said that the increasing market rent in Singapore is expected to close the gap between expiring and new and renewal rents to be committed for leases expiring next year. As for the Frankfurt market, the REIT commented:

“Frankfurt prime office rent market has been resilient through property cycles. With the relatively low new supply completing in 2018 and 2019, as well as good pre-letting levels, the prime office rents in Frankfurt are well-supported.”

The two new acquisitions of Asia Square Tower 2 and Gallileo have improved the REIT’s distributable income, and that is pleasing to see. CapitaLand Commercial Trust also has a gearing ratio that is well below the regulatory limit of 45%, giving it headroom to gear up for more acquisitions in the future. CapitaLand Commercial Trust’s unit price is at S$1.70 per unit at the time of writing, giving the REIT a price-to-book ratio of 0.94 and a trailing distribution yield of 5.0%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of CapitaLand Commercial Trust. Motley Fool Singapore contributor Sudhan P owns units in CapitaLand Commercial Trust.