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CCT’s 1Q 2019 distributable income up 8.0% year-on-year

Invest / Direct Property Funds

Singapore

Apr 20 2019

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CapitaLand Commercial Trust Management Limited, the Manager of CapitaLand Commercial Trust (CCT or Trust), is pleased to report distributable income of S$82.7 million for the quarter ended 31 March 2019 (1Q 2019), an uplift of 8.0% from 1Q 2018. Distribution per unit (DPU) was 2.20 cents, 3.8% higher than the 2.12 cents a year ago. 

Gross revenue and net property income for the quarter increased by 3.5% and 3.4% year-on-year to S$99.8 million and S$79.8 million respectively. The improved performance was largely due to contributions from Gallileo – acquired in June 2018 – and higher occupancy at Asia Square Tower 2, which more than offset the divestment of Twenty Anson. Based on the annualised 1Q 2019 DPU and CCT’s closing price per unit of S$1.93 on 18 April 2019, CCT’s distribution yield is 4.6%. 

As at 31 March 2019, CCT’s total deposited property value was S$11.1 billion while its adjusted net asset value per unit (excluding distributable income payable to unitholders) was S$1.79. 

The Trust’s unaudited Consolidated Financial Statements for 1Q 2019 results are available on its website (www.cct.com.sg) and on SGXNet (www.sgx.com). 

 Mr Kevin Chee, Chief Executive Officer of the Manager, said: “We are pleased to report that CCT achieved a DPU of 2.20 cents in 1Q 2019 and maintained a strong portfolio occupancy rate of 99.1% as at 31 March 2019. The Trust delivered a strong set of results from its strategic portfolio reconstitution achieved by the acquisition of a 94.9% stake in Gallileo and the divestment of Twenty Anson, which mitigated the flow through of negative rental reversions from leases committed last year. This resilient performance was further underpinned by CCT’s proactive asset and capital management.” 

Mr Chee added: “With monthly Grade A office rent trending upwards and limited new supply coming onstream from now until 2021, it is an opportune time to ride the positive office market cycle. CCT will focus on maintaining a high portfolio occupancy, signing office rents above market levels and securing positive rental reversions. We will also be ramping up marketing activities for CapitaSpring, with plans to open an interactive marketing showsuite in 2Q 2019.” 

1Q 2019 also saw the launch of flexible spaces and new community activities at Capital Tower. These include the 230-seater Big Picture theatre, an auditorium by day and a cinema by night; Flex, a multi-purpose wellness studio for fitness and dance classes on the ninth floor; and MARK, a members-only business club by The Work Project. 

Active portfolio leasing 

In 1Q 2019, CCT signed over 225,000 square feet of new leases and renewals, of which 18% were new leases. Rental reversions for most of the office leases signed were positive. New demand for office space was driven by tenants from diverse trade sectors. These included companies in Retail Products and Services; Financial Services; and Business Consultancy, IT Media & Telecommunications. To date, more than half of 2019 expiring leases (based on monthly gross rental income) have already been committed. However, the negative rent reversions for leases signed in prior quarters are expected to flow through as seen in the year-on-year gross revenue for CapitaGreen and Six Battery Road in 1Q 2019. This may impact overall portfolio revenue growth in 2019. 

CCT returned leasehold interest of Bugis Village to the State on 1 April 2019 and received the agreed compensation sum of S$40.7 million. Concurrently, CCT signed a one-year master lease with the State for Bugis Village from 1 April 2019 to 31 March 2020, with a projected net income of S$1.0 million. As at 1 April 2019, about 84% of tenants at Bugis Village have committed to extend their leases. 

Proactive capital management 

As part of CCT’s proactive capital management efforts, most of the borrowings due in 2019 have been refinanced ahead of their maturity and the Trust only has a fixed rate Japanese Yen (equivalent S$148.3 million) medium term notes due end of this year. Average cost of debt was 2.5% per annum as at 31 March 2019. Aggregate leverage inched up slightly from 34.9% in 4Q 2018 to 35.2% in 1Q 2019, largely due to a S$9 million debt drawdown for CapitaSpring (45.0% interest). To provide certainty of interest expense, 92% of CCT’s total borrowings are on fixed rates. 

Outlook 

The monthly Grade A office market rent in Singapore increased by 3.2% year-on-year to S$11.15 per square foot in 1Q 2019, according to data from CBRE Research. Occupancy in Singapore’s Core CBD office buildings as at end March was 95.4%, up from 94.8% in the previous quarter. Barring unforeseen events affecting macro environment, the Singapore office market is expected to see continued rental growth in 2019. 

Prime office market rent in Frankfurt has remained resilient through property cycles. Vacancy rates have declined to record lows in the Banking District, where Gallileo is located, due to active office leasing. Leasing commitments at new developments have also increased. 

 

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