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CCT’s 4Q 2018 distributable income up 10.7% year-on-year

Invest / Direct Property Funds

Singapore

Feb 06 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$83.1 million for the quarter ended 31 December 2018 (4Q 2018), an uplift of 10.7% from 4Q 2017. Distribution per unit (DPU) was 2.22 cents, 6.7% higher than the 2.08 cents a year ago. Gross revenue and net property income for the quarter increased by 14.8% and 16.6% year-on-year respectively. The better performance was largely attributed to the contributions from newly acquired Asia Square Tower 2 and Gallileo, which more than offset the loss of income from the divestment of Twenty Anson. 

For 2H 2018, distributable income was S$165.7 million, an increase of 11.9% from 2H 2017. For FY 2018, distributable income was 11.4% higher than a year ago. Based on FY 2018 DPU of 8.70 cents and closing price per unit of $1.83 on 23 January 2019, CCT’s distribution yield is 4.8%. The books closure date is Friday, 1 February 2019 and the 2H 2018 DPU of 4.42 cents is expected to be paid on Thursday, 28 February 2019. 

As at 31 December 2018, independent appraisals valued the Trust’s investment properties (including the Trust’s proportionate interest in investment properties held at the joint ventures, namely Raffles City Singapore, One George Street and CapitaSpring) at S$10.6 billion, up 7.1% year-on-year. This translates to an adjusted net asset value per unit of S$1.80, up 3.4% year-on-year. 

The Trust’s unaudited Consolidated Financial Statements for FY 2018 results are available on its website (www.cct.com.sg) and on SGXNet (www.sgx.com). 

Mr Soo Kok Leng, Chairman of the Manager, said: “Our multi-pronged approach to consistently strengthen CCT’s assets, portfolio and balance sheet has led to a good set of results in FY 2018. As at end 2018, CCT’s deposited property value grew 4.0% year-on-year to S$11.2 billion, underscoring the Manager’s focus on creating long-term value for unitholders. During the year, we diversified CCT’s growth engines geographically with a strategic acquisition in Frankfurt, Germany. We will continue to explore investment opportunities in select gateway cities of developed markets, while strengthening CCT’s market leadership in its home base.” 

Mr Kevin Chee, Chief Executive Officer of the Manager, said: “We are pleased to conclude FY 2018 with stronger financial and operating metrics, reinforcing CCT’s leading market position as Singapore’s largest office REIT. In 2H 2018, CCT achieved DPU of 4.42 cents, 7.8% higher than the corresponding period in 2017. The growth reflected the income contribution from the acquisitions of Asia Square Tower 2 and Gallileo. As at end-December 2018, portfolio occupancy stood at 99.4%, an improvement from 97.3% a year ago. Tenant retention remained healthy at 77%.” 

“Looking ahead, we will strive to maintain robust portfolio occupancy and retain tenants while committing rents above market levels. In addition, we will pursue investment and value creation opportunities in Singapore and Germany, where 95% and 5% of CCT’s assets are currently located respectively. On the longer horizon, CCT’s growth pipeline includes the call option for the remaining 55% of CapitaSpring’s commercial component not owned by CCT. The call option is exercisable within five years after the development’s temporary occupation permit is obtained, which is expected in 1H 2021.” 

Active portfolio leasing 

In 2018, CCT signed slightly over 1 million square feet of new leases and renewals, of which 22% were new leases. New demand for office space was supported by tenants from diverse trade sectors. These included companies in Real Estate & Property Services; Business Consultancy, IT, Media & Telecommunications; Financial Services; Energy, Commodities, Maritime & Logistics; and Manufacturing & Distribution. To date, half of 2019 expiring leases (based on monthly gross rental income) have already been committed. 

Proactive and prudent capital management 

As part of proactive capital management efforts, the Manager concluded S$2.2 billion of debt financing during FY 2018. Borrowings due in 2019 have been refinanced ahead of their maturity, leaving only the fixed rate medium term notes expiring in December. CCT also raised net proceeds of S$214.3 million via private placement to partially fund the acquisition of Gallileo. 

As at end 2018, CCT’s aggregate leverage was 34.9%, weighted average term to maturity was 3.9 years and all‐in average cost of debt was 2.6% per annum. To mitigate exposure to interest rate volatility, 92% of the Trust’s total borrowings are on fixed rates. 3 

Outlook 

Based on data from CBRE Research, Singapore’s average monthly Grade A office market rent increased by 14.9% year-on-year to S$10.80 per square foot in 4Q 2018. Occupancy in Singapore’s Core CBD as at end December 2018 was 94.8%, slightly higher than the 94.6% in the preceding quarter. Property consultants generally expect Grade A office market rent to continue trending upwards in 2019, although at a lower rate of 8% to 10%. 

In 4Q 2018, Frankfurt’s office market saw active leasing activities, which led to a decline in vacancy and an increase in leasing commitment at new developments. With relatively lower new supply completing in 2019, as well as strong pre-letting levels, the prime office rents in Frankfurt are expected to rise. 

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