Higher distributable income and resilient portfolio buoyed by above-market committed occupancy
Singapore, 20 July 2016 – CapitaLand Commercial Trust Management Limited, the Manager of CapitaLand Commercial Trust (CCT or Trust), is pleased to report an estimated distribution per unit (DPU) of 2.20 cents1 for the financial quarter ended 30 June 2016 (2Q 2016). For the six months ended 30 June 2016 (1H 2016), CCT attained a DPU of 4.39 cents, a 1.9% increase year-on-year (y-o-y). Based on CCT’s closing price per unit of S$1.57 on 19 July 2016 and an annualised 1H 2016 DPU, CCT’s distribution yield is 5.6%.
Higher contributions from CCT’s 40.0% and 60.0% interests in CapitaGreen and Raffles City Singapore respectively, resulted in a y-o-y rise in distributable income for 2Q 2016 by 1.0% and for 1H 2016 by 2.2%. The better performance was achieved notwithstanding lower gross revenue of S$67.6 million for 2Q 2016 and S$134.4 million for 1H 2016 due to lower occupancies in a few buildings. Higher operating expense attributed to leasing commissions and property tax contributed to lower net property income of S$51.4 million for 2Q 2016 and S$103.5 million for 1H 2016.
The Trust pays out its distributable income semi-annually in February and August. With the books closure date for 1H 2016 DPU being Thursday, 28 July 2016, payment of the 1H 2016 DPU of 4.39 cents(1) is expected to be made on Thursday, 25 August 2016.
As at 30 June 2016, the total value of the Trust’s deposited properties was S$7,787.8 million and the adjusted net asset value per unit was S$1.72, after deducting distributable income payable to unitholders. The Trust’s portfolio valuation increased by 0.4% over a six-month period due to generally higher net property income achieved compared to appraisers’ assumptions in the December 2015 valuation exercise.
RCS Trust, a sub-trust which holds Raffles City Singapore, has borrowings of S$641.7 million (CCT’s 60.0% interest) due on 21 June 2016 which were entirely refinanced with unsecured bank facilities. Raffles City Singapore is now unencumbered. On 4 July 2016, the Manager announced that CCT MTN Pte Ltd issued S$75 million fixed rate notes which will mature on or about 4 July 2022 at a fixed interest rate of 2.77% per annum. CCT MTN Pte Ltd then on-lent to CCT which in turn used the proceeds to refinance part of existing borrowings under the bank loan facility due in 2020.
As at 30 June 2016, aggregate leverage was 29.8% and average cost of debt remained stable at 2.5% per annum, contributing to the Trust’s continually healthy balance sheet.
The Trust’s unaudited Consolidated Financial Statements for 2Q 2016 results are available on its website (www.cct.com.sg) and on SGXNet (www.sgx.com).
Summary of CCT Group Results
Ms Lynette Leong, Chief Executive Officer of the Manager, said, “We are pleased that CCT has delivered a higher DPU in 2Q 2016 and for the first half of 2016. Despite the muted macro-economic environment and challenging office market conditions in Singapore, CCT’s portfolio occupancy rate of 97.2% remains higher than market occupancy rate of 95.1% in 2Q 2016. In 1H 2016, we have successfully renewed or signed new leases with high quality tenants, which included that of the Economic Development Board of Singapore, one of CCT’s top ten tenants. This leaves only 4% of office leases2 to be renewed this year and 10% of office leases2 due in 2017, as we proactively retain tenants and attract new ones.”
Ms Leong added, “We wish to thank our unitholders for their overwhelming approval at the recent Extraordinary General Meeting of our proposed acquisition of the complete interests in CapitaGreen from our joint venture partners. It endorses our successful portfolio reconstitution strategy of creating sustainable value for CCT through the redevelopment of the former Market Street Car Park into the premier Grade A office building, CapitaGreen. Upon the acquisition’s completion in the coming months, we will have 100.0% income contribution from CapitaGreen which will boost CCT’s portfolio net property income in 4Q 2016 as well as financial year 2017 and beyond. This will help to mitigate any downside risk to portfolio performance due to the current weak office market.”
In 2Q 2016, CCT signed approximately 277,000 square feet of new leases and renewals, of which 27% were new leases. New and renewed tenants in the quarter included the Economic Development Board, Freemont Capital Pte Ltd, General Mills Singapore Pte Ltd, Invictus Asset Management Pte Ltd, The Korea Development Bank and Sea Hub Energy Pte Ltd.
Outlook for Singapore Central Business District (CBD)
Office Market The Singapore office market continued to see declines in occupancy and rental rates given the impending completion of above-average new office supply in the Core Central Business District (CBD). Singapore’s Core CBD occupancy rate was unchanged at 95.1% in 2Q 2016 with a pick-up in leasing activity, but average monthly Grade A office market rent declined by 4% in the quarter to S$9.50 per square foot. The y-o-y decline was 15.9%. Market vacancy rate is expected to rise in the short term, with the completion of new supply over the next six to nine months.
1 The estimated DPU of 2.20 cents for 2Q 2016 and 4.39 cents for 1H 2016 were computed on the basis that none of the convertible bonds due 2017 is converted into CCT units. Accordingly, the actual quantum of DPU may differ if any of the CB 2017 is converted into Units on or before books closure date.
2 Based on office lease expiry profile by occupied net lettable area as at 30 June 2016