CCT achieved higher distributable income in 3Q 2013 despite cessation of One George Street’s yield protection income
Robust balance sheet with low gearing of 29.5 per cent provides financial flexibility
Singapore, 18 October 2013 – CapitaCommercial Trust Management Limited, the Manager of CapitaCommercial Trust (CCT or Trust), is pleased to report a distributable income of S$58.8 million for the financial quarter ended 30 September 2013 (3Q 2013), which was 1.6 per cent more than the S$57.9 million reported in 3Q 2012. This was largely due to lower interest expenses in 3Q 2013 and distribution of tax-exempt 1H 2013 distributable income received from Quill Capita Trust. The estimated distribution per unit (DPU) of 2.041 cents for 3Q 2013, together with the DPU for 4Q 2013, will be paid out in February 2014 as CCT distributes semi-annually. Based on CCT’s closing price per unit of S$1.42 on 17 October 2013, CCT’s distribution yield is 5.7 per cent.
The gross revenue of S$94.9 million in 3Q 2013 was only marginally lower than the S$95.5 million achieved in 3Q 2012. Higher revenue from Six Battery Road and Raffles City Singapore compensated for the lower income contribution from Capital Tower due to its lower occupancy, and for the cessation of yield protection income for One George Street from 10 July 2013. Lower revenue and higher operating expenses resulted in a net property income of S$72.6 million in 3Q 2013, a decrease of 3.5 per cent from S$75.2 million in 3Q 2012. However, the portfolio operating margin was still within the range of 75.0 per cent to 80.0 per cent achieved by CCT in the past.
The Trust’s unaudited Consolidated Financial Statements for 3Q 2013 and Year-to-date September 2013 results are available on its website (www.cct.com.sg) and on SGXNet (www.sgx.com).
Summary of CCT’s 3Q 2013 and Year-to-date September 2013 Results
YTD Sep 2013
YTD Sep 2012
Gross Revenue (S$’000)
Net Property Income (S$’000)
Distributable Income (S$’000)
Estimated Distribution Per Unit -
For the period
Mr Kee Teck Koon, Chairman of the Manager, said, “CCT’s portfolio has performed well in the third quarter despite the cessation of One George Street’s yield protection income in July 2013 and the uncertain economic environment. Our intensified marketing and leasing efforts have translated into higher committed portfolio occupancy rate of 97.6 per cent as at 30 September 2013. Higher rents have also been secured for most new leases and renewals for the year todate. CCT will enjoy the full impact of this positive rent reversion flow-through in 2014. We will continue with our current strategies to harness organic growth from our property portfolio, and create growth from our 40.0 per cent interest in the CapitaGreen development for the benefit of CCT unitholders.”
Mr Kee added, “The Trust has a strong balance sheet with a low gearing at 29.5 per cent. Assuming a gearing of 40.0 per cent, CCT has a debt headroom of S$1.2 billion for investment opportunities. However, we remain disciplined in our acquisition approach with a focus on Singapore properties having a strategic fit with and value accretion to our existing portfolio.”
Ms Lynette Leong, Chief Executive Officer of the Manager, said, “We are encouraged by the increase in leasing activities at CCT’s properties. CCT has signed new leases and renewals of approximately 347,000 square feet for 3Q 2013, of which 42.0 per cent are new leases. Leasing activities at Six Battery Road and One George Street have been brisk and we expect occupancy rates to continue strengthening from the 3Q 2013 levels of 97.9 per cent and 94.2 per cent respectively. Capital Tower’s committed occupancy rate was up by 6.5 per cent to 97.1 per cent with the signing of a long term lease with CapitaLand Limited for 100,000 square feet of space including its existing occupied space on level 30. We are currently in advanced lease negotiation with one of CapitaLand’s business units for about 40,000 square feet of additional space at Capital Tower. Upon the completion of this lease negotiation possibly in 4Q 2013, Capital Tower’s committed occupancy rate will be 100.0 per cent.”
She added, “The new and renewed office leases at our Grade A buildings were signed at an average effective rent of S$9.81 per square foot per month, which was generally higher than the average market rent. Meanwhile, our monthly average office portfolio rent continues its uptrend, increasing by 0.9 per cent to S$8.03 per square foot per month this quarter. Given the uptick in office market rents as affirmed by market statistics, CCT should further benefit from positive rent reversions for 13 per cent of office leases based on portfolio gross rental income that are due for rent review and renewal in 2014.”
New and renewed tenants for 3Q 2013 include CapitaLand Limited, Wilfred T. Fry (Personal Financial Planning) Limited, Hay Group Pte Ltd, Rakuten Asia Pte. Ltd., MacGregor Pte. Ltd., Diageo Singapore Pte. Ltd. and SAS Institute Pte Ltd.
Robust Capital Management
In September 2013, the Manager proactively extended CCT’s committed term loan facilities for an aggregate amount of S$450.0 million and a revolving credit facility of S$100.0 million, which would otherwise expire in 2014 and 2015 respectively. A new committed revolving credit facility of S$100.0 million was also secured. These new bank facilities aggregating S$650.0 million will have maturity dates ranging from 2018 to 2020, thereby extending the average maturity of CCT’s debt portfolio from 2.8 years to 3.7 years. Despite the expectation of a rising interest rate environment, the Manager has successfully reduced the average cost of debt per annum from 2.8 per cent as at 2Q 2013 to 2.7 per cent as at 3Q 2013. About 75.0 per cent of the Trust’s borrowings are on fixed interest rates, which safeguards against the impact of any increase in interest rate.
Outlook for Singapore Central Business District (CBD) Office Market
The average office occupancy rate in Singapore’s CBD decreased by 1.6 per cent to 93.5 per cent in 3Q 2013 from 95.1 per cent in 2Q 2013, largely due to the addition of a new office tower to the total office stock. According to CBRE, Grade A office rents remained stable for a third consecutive quarter at S$9.55 per square foot per month, and their forecast is for a modest rental recovery, possibly from the next quarter. Whereas at least four other property consultants including Cushman & Wakefield, Knight Frank, DTZ and Colliers International have reported an uptrend in the Grade A office market rents by 0.6 per cent to 2.8 per cent to a monthly rental range between S$9.14 per square foot and S$10.45 per square foot for 3Q 2013.
The outlook for the office market is sanguine given the consistent demand across active and diverse sectors such as professional services, energy and commodities, insurance and IT. Additionally, a number of sizeable tenants have activated relocation plans to better quality office buildings with increased space requirements; this also contributes to the optimistic view.
Historically, the net absorption for CBD office averaged approximately 1 million square feet annually from 1994 to mid-2013, almost equally matched by approximately 1 million square feet of average annual net supply over the same period. The forecast for Singapore CBD’s annual new office supply from 2014 to 2018 averages about 1.1 million square feet. However, for 2014 and 2015, the actual new office completion in the CBD area is expected to be limited to only 1.2 million square feet for the two years. CCT’s Grade A office development, CapitaGreen, which is scheduled to be completed in 4Q 2014, is well positioned to benefit from this potential window of limited supply.
1 DPU for 3Q 2013 and YTD September 2013 were computed on the basis that none of the convertible bonds due 2015 (“CB due 2015”) or convertible bonds due 2017 (“CB due 2017”) collectively known as “Convertible Bonds”, is converted into CCT units. Accordingly, the actual quantum of DPU may differ if any of these Convertible Bonds is converted into CCT units.