CLCT's FY 2022 net property income up 1.5% year-on-year to S$254.2 million
Rejuvenated portfolio well-positioned to tap China’s reopening
03 Feb 2023
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CLCT FY 2022 performance ‘s boosted by full-year contributions from the acquisitions of five business parks and four logistics parks completed in 2021. Pictured here is Singapore-Hangzhou Science & Technology Park.
Singapore, 3 February 2022 – CapitaLand China Trust Management Limited (CLCTML), the manager of CapitaLand China Trust (CLCT or Trust), announced today a net property income (NPI) of S$254.2 million for the financial year 2022 (FY 2022), 1.5% higher than FY 2021. The increase in NPI was driven by full-year contributions from the acquisitions of five business parks and four logistics parks completed in 2021. This was partially offset by higher rental relief provided for tenants whose operations were affected by long periods of COVID-19 lockdown during the year, particularly in 2H 2022.
For the period 1 July to 31 December 2022 (2H 2022), NPI was RMB570.1 million, 8.7% lower year-on-year, due to higher rental relief on the back of tougher operating conditions (particularly in 4Q 2022) and associated AEI downtime for various malls in 2H 2022. Consequent to the stronger Singapore dollar against RMB, NPI was S$114.7 million, 11.8% lower than 2H 2021.
FY 2022 distributable income was S$125.6 million and FY 2022 distribution per unit (DPU) on an enlarged unit base was 7.50 cents. FY 2022 distributable income was impacted by lower retail performance, higher interest expense as well as the absence of one-off proceeds[1]. Based on CLCT’s closing price of S$1.27 on 2 February 2023, the distribution yield for FY 2022 was 5.9%. CLCT’s Record Date is 13 February 2023, and Unitholders will receive the 2H 2022 DPU of 3.40 cents on 30 March 2023.
Mr Soh Kim Soon, Chairman of CLCTML
Mr Soh Kim Soon, Chairman of CLCTML, said: “China’s GDP grew by 3% in 2022, amidst COVID-19 challenges. Further to its reopening and supported by targeted fiscal and monetary policies, China’s economy is expected to rebound in 2023. As the business environment improves, with most Chinese provinces targeting growth of above 5%, CLCT’s diversified portfolio is well-placed to capitalise on growth opportunities across multiple sectors.”
With CLCT’s diversified portfolio and tenant base well-aligned with China’s focus on domestic consumption and innovation-driven growth, we look forward to riding on China’s swift reopening and pro-growth policies to deliver sustainable long-term value for Unitholders.
Mr Tan Tze Wooi, CEO of CLCTML
Mr Tan Tze Wooi, CEO of CLCTML, said: “Our strategic pivot to create a diversified portfolio has helped CLCT to weather the impact of COVID-19 in FY 2022, with contributions from our newly acquired new economy assets providing income stability and mitigating the softness in our retail portfolio. Despite challenges in the macro environment, CLCT’s portfolio valuation as at end-2022 improved by 2.0%. This was supported by an uplift of 9.3% in the valuation of our new economy assets, partially offset by a decline of 0.6% in the valuation of our retail assets.”
“Notwithstanding lower leasing activities, CLCT’s retail assets, business parks and logistics parks registered positive rental reversions for FY 2022 and achieved steady occupancy of 95.4%[2], 91.4% and 96.4% respectively as at end-2022, with improved tenant quality. This was attributed to our proactive asset and lease management strategies to rejuvenate existing assets through asset enhancement initiatives (AEIs) and tenant mix refresh. More AEIs are underway to support CLCT’s efforts to capture the upside from China’s reopening, with works at CapitaMall Yuhuating and CapitaMall Grand Canyon due for completion by 1Q 2023.”
Mr Tan Tze Wooi, CEO of CLCTML
“With the worst of China’s COVID-19 situation behind us, we expect CLCT’s retail portfolio to shift to a positive trajectory in 2023, supported by strategically timed AEIs and unit reconfigurations. Looking ahead, we will focus on maintaining a strong balance sheet through disciplined capital management and the use of appropriate hedging instruments, while actively looking to unlock value from mature assets to increase our financial capacity. We will also seek out yield-accretive acquisitions to further enhance CLCT’s portfolio quality. With CLCT’s diversified portfolio and tenant base well-aligned with China’s focus on domestic consumption and innovation-driven growth, we look forward to riding on China’s swift reopening and pro-growth policies to deliver sustainable long-term value for Unitholders.”
Operating performance
CLCT’s new economy assets demonstrated resilience throughout the pandemic, achieving a positive rental reversion of 6.4% for FY 2022. The key growth drivers are tenants in the Biomedical Sciences, Engineering, Information & Communications Technology and Electronics sectors. As at 31 December 2022, the occupancy of CLCT’s business parks and logistics parks stood at 91.4% and 96.4% respectively.
As for CLCT’s retail portfolio, FY 2022 shopper traffic and tenant sales fell 20.1%2 and 12.7%2 year-on-year respectively, due to a higher number of mandated mall closure days. On a positive note, shopper traffic and tenant sales have begun to pick up from December 2022. FY 2022 rental reversion was positive at 2.7%2, largely due to the boost in CapitaMall Wangjing’s rents after the completion of AEI.
In 2022, CLCT completed an asset enhancement initiative at CapitaMall Wangjing in Beijing, contributing to the positive rental reversion of its retail portfolio.
CapitaMall Yuhuating’s AEI to reconfigure 8,900 square metres (sq m) of supermarket space to house a variety of specialty stores is on track for completion in 1Q 2023, with a target return on investment of more than 15%. About 82% of area has been pre-leased by end-2022. At CapitaMall Grand Canyon, CLCT recovered 1,700 sq m from a mini-anchor tenant. Post-reconfiguration, the area is expected to generate an additional 7.4% of the mall’s FY 2022 revenue. To date, about 77% of the area has commenced operations and the remaining space is slated for opening by March 2023.
AEI at CapitaMall Yuhuating in Changsha due for completion by 1Q 2023.
CLCT’s retail portfolio occupancy was 95.4%[2] as at 31 December 2022. As CLCT’s master lease for CapitaMall Qibao will be expiring in January 2024, CLCT targets to close the mall in advance by 1H 2023 to reduce operating expenses. The mall’s closure is expected to have minimal financial impact on CLCT as it accounted for only 0.11% of CLCT’s portfolio valuation as at 31 December 2022.
Capital management
CLCT’s financial position remained strong with a well-staggered debt maturity profile and diversified sources of funding. As at 31 December 2022, the average term to maturity of CLCT’s borrowings was 3.4 years and its cost of debt was 2.97% per annum. The proportion of sustainability-linked loans has increased to 13% of CLCT’s total loans.
To mitigate interest rate risk exposure, about 71% of CLCT’s total debt is on fixed interest rates. CLCT has hedged approximately 54.5% of its undistributed income for 2H 2022 into Singapore dollars to minimise the impact of foreign currency fluctuations. As at 31 December 2022, CLCT’s gearing was a healthy 39.6%, well below the regulatory limit of 50%.
Sustainability initiatives
CLCT is committed to making a positive environmental and social impact on the communities where it operates. During 2022, CLCT participated in the Global Real Estate Sustainability Benchmark (GRESB) Real Estate Assessment and scored a GRESB Public Disclosure rating of “A”. In addition, CLCT obtained LEED Gold certification for CapitaMall Wangjing and Rock Square after completing AEIs at these properties. To align tenants to its sustainability goals, CLCT has started to implement green leases that encourage tenants to incorporate environment-friendly features in their premises and adopt sustainable practices.
Summary of CLCT results1,2
|
1 Jul to 31 Dec 2022 (2H 2022) |
1 Jul to 31 Dec 2021 (2H 2021) |
FY 2022 |
FY 2021 |
|
Actual S$’000 |
Actual S$’000 |
Actual S$’000 |
Actual S$’000 |
Gross Revenue3 |
183,876 |
201,075 |
383,171 |
377,967 |
Net Property Income |
114,684 |
130,085 |
254,216 |
250,427 |
Amount available for distribution to Unitholders4 |
53,298 |
71,445 |
125,615 |
135,516 |
Amount released/(retained)5 |
3,616 |
- |
- |
- |
Distributable amount to Unitholders |
56,914 |
71,445 |
125,615 |
135,516 |
Distribution Per Unit (“DPU”) (cents)6 |
||||
For the period/year |
3.40 |
4.50 |
7.50 |
8.73 |
|
2H 2022 |
2H 2021 |
FY 2022 |
FY 2021 |
|
Actual RMB’000 |
Actual RMB’000 |
Actual RMB’000 |
Actual RMB’000 |
Gross Revenue3 |
911,266 |
965,152 |
1,851,516 |
1,826,147 |
Net Property Income |
570,102 |
624,180 |
1,228,393 |
1,209,901 |
Footnotes:
1. The financial results exclude contribution from CapitaMall Saihan which was divested on 7 June 2021. The financial results include contributions from Ascendas Xinsu Portfolio, Ascendas Innovation Towers and Ascendas Innovation Hub as the acquisitions of these properties were completed on 4 January 2021, 10 February 2021 and 26 February 2021 respectively. While the acquisitions of the Singapore-Hangzhou Science & Technology Park Phase I and Phase II were completed on 18 June 2021, the risk and reward have been transferred from 15 February 2021. In addition, the results include contributions from Kunshan Bacheng Logistics Park, Wuhan Yangluo Logistics Park, Chengdu Shuangliu Logistics Park and Shanghai Fengxian Logistics Park as the acquisitions of these properties were completed on 10 November 2021.
2. Average exchange rate for SGD/RMB.
2H 2022 |
2H 2021 |
Change % |
FY 2022 |
FY 2021 |
Change % |
4.971 |
4.798 |
3.6 |
4.832 |
4.831 |
- |
3. The financial results include rental relief extended to tenants in view of the COVID-19 situation.
4. Includes rental support (which was previously deducted from the amount paid to the vendor) for the vacancy loss and rent free provided to existing tenants for Chengdu Shuangliu Logistics Park and Wuhan Yangluo Logistics Park which will be distributed as capital distribution.
5. In 2H 2022, CLCT released S$3.6 million from the amount available for distribution to Unitholders that was previously retained in 1H 2022.
6. The DPU is computed based on total issued units of 1,673.9 million and 1,659.5 million as at 31 December 2022 and 31 December 2021 respectively.
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