CCT’s 3Q 2017 distributable income up 7.0% year-on-year
Rejuvenates portfolio with strategic acquisition of Asia Square Tower 2 and starts redevelopment of Golden Shoe Car Park into landmark integrated development
Singapore, 20 October 2017 – CapitaLand Commercial Trust Management Limited, the Manager of CapitaLand Commercial Trust (CCT or Trust), is pleased to report higher distributable income of S$73.1 million in 3Q 2017 compared to S$68.3 million in 3Q 2016. The year-on-year (y-o-y) growth of 7.0% was due to stronger performance from CapitaGreen and a S$3.3 million top up for the loss of distributable income arising from the divestments of One George Street (50% interest) and Wilkie Edge. Net property income (NPI) grew by 2.7% y-o-y to S$58.6 million, while gross revenue was stable at S$74.1 million1.
CCT launched an approximately S$700.0 million fully underwritten and renounceable rights issue on 21 September 2017. The net proceeds of the rights issue will be used to part fund the Asia Square Tower 2 acquisition. With the close of the rights issue on 19 October 2017, about 513 million CCT rights units (Rights Units) will be listed and traded on Singapore Exchange Securities Trading Limited (SGX-ST) on 27 October 2017. Upon allotment and issue of the Rights Units, they will rank pari passu in all respects with the existing CCT units then in issue, including the right to any distributions which may accrue for the period from 1 July 2017 to 31 December 2017 as well as all distributions thereafter.
The 3Q 2017 distributable income of S$73.1 million and the enlarged units base translates to an estimated distribution per unit (DPU) of 2.02 cents2 for 3Q 2017. CCT’s distribution yield of 5.3% is derived from the annualised year-to-date (YTD) 2017 DPU and CCT’s closing price per unit of S$1.66 on 19 October 2017.
Based on CCT’s balance sheet as at 30 September 2017, and factoring in the completion of the Asia Square Tower 2 acquisition and rights issue, the Trust’s adjusted net asset value per unit would be S$1.75.
The Trust’s unaudited Consolidated Financial Statements for 3Q 2017 results are available on its website (www.cct.com.sg) and on SGXNet (www.sgx.com).
SUMMARY OF CCT GROUP RESULTS
YTD Sep 2017
YTD Sep 2016
Gross Revenue (S$’000)
Net Property Income (S$’000)
Distributable Income (S$’000)
Adjusted DPU (cents)5
Ms Lynette Leong, Chief Executive Officer of the Manager, said, “CCT has delivered a positive set of results this quarter, with portfolio committed occupancy rate at 98.5% as at end September 2017, well-above the market rate of 92.5%. This excludes the occupancy rate of Asia Square Tower 2 as the acquisition will only be completed in November 2017. Our latest acquisition is strategic and timely as it comes at the bottom of the Grade A office market rent cycle. This also marks the successful completion of another cycle of portfolio reconstitution where proceeds from the divestment of One George Street and Wilkie Edge were redeployed into a newer premium Grade A asset, Asia Square Tower 2; and the redevelopment of Golden Shoe Car Park into an integrated development incorporating the ‘office of the future’ and vibrant lifestyle offerings. Asia Square Tower 2 firmly extends CCT’s footprint into Marina Bay, resulting in a more resilient, diversified and higher quality asset base; and a stronger tenant mix that augments CCT for long-term growth. We thank our unitholders for their strong support of the rights issue which will help part fund the acquisition.”
The Trust has a healthy balance sheet with an aggregate leverage of 33.9%6, well below the regulatory limit of 45.0%, which allows for adequate debt headroom to complete funding for the Asia Square Tower 2 acquisition and the ongoing redevelopment of Golden Shoe Car Park, expected to be completed in first half of 2021. Its average cost of debt remains stable at 2.7% as at 30 September 2017. About 85% of the Trust’s borrowings are pegged at fixed rates, which offer greater certainty of interest expense in a rising interest rate environment. All S$175.0 million convertible bonds due September 2017 have been cancelled and converted and CCT has no debt maturing in 2017.
In 3Q 2017, CCT signed approximately 170,000 sq ft of leases, of which 30.0% were new leases. Leasing demand came from the Banking, Financial Services; and Energy, Commodities, Maritime and Logistics sectors. New and renewed tenants this quarter include Gain Capital Singapore Pte. Ltd., Robert Walters (Singapore) Pte Ltd, Straits Tankers Pte. Ltd. and Varde Partners Asia Pte. Ltd. All lease renewals in 2017 are largely completed. In 2018, about 10% of leases based on committed office net lettable area are due for renewal.
Awards and Accolades CCT was ranked second by Institutional Investor in its Most Honoured Companies list for Singapore under Small and Midcap Companies, voted by more than 3,900 investment professionals at 980 financial services firms. The Trust was also a runner-up at Securities Investors Association (Singapore) or SIAS’ Singapore Corporate Governance Award 2017 under the REITS and Business Trusts category.
Outlook Based on data from CBRE Pte. Ltd., Singapore’s Core CBD occupancy rate eased to 92.5% while that of the Grade A office saw a dip by 3.9% to 91.6% as at 30 September 2017. Average monthly market rent for Grade A offices rose by 1.7% quarter-on-quarter to S$9.10 psf in 3Q 2017, an indication that the market may have bottomed out. This rise in market rent is ahead of most property consultants’ projections in the beginning of the year. However, lower net property income is expected in FY2018 at select properties in CCT’s current portfolio due to flow-through of negative rent reversions of leases committed in 2017 and potentially continued negative rent reversions in 2018.
1Contribution from CCT’s 50.0% interest in OGS LLP is reported as part of “share of profits of joint ventures” and no longer accounted for under CCT Group’s gross revenue.
2DPU adjusted for enlarged 3,607.2 million units assuming completion of rights issue but does not take into account income contribution from Asia Suqare Tower 2.
3Includes other gains of S$3.3 million.
43Q 2017 DPU of 2.36 cents was computed based on 3,094 million of CCT units issued as at 30 September 2017. YTD Sep 2017 DPU of 6.92 cents was based on the aggregate of 1H 2017 actual DPU of 4.56 cents announced on 27 July 2017 and 3Q 2017 DPU of 2.36 cents.
5The adjusted DPU was computed after taking into consideration additional 513 million CCT Units expected to be listed on 27 October 2017 pursuant to the equity issuance exercise announced on 21 September 2017. The equity issuance exercise relates to the approximately S$700 million underwritten renounceable rights issue. The rights ratio is 166 Rights Units for every 1,000 existing CCT Units, offered at an issue price of S$1.363 per rights unit. The Rights Units to be issued will rank pari passu in all respects with the existing Units, including the right to any distributions which may accrue for the period from 1 July to 31 December 2017 as well as all distributions thereafter.
Adjusted YTD Sep 2017 DPU of 6.58 cents was based on 1H 2017 actual DPU of 4.56 cents announced on 27 July 2017 and adjusted 3Q 2017 DPU of 2.02 cents. Adjusted YTD Sep 2016 DPU of 6.28 cents was based on the 1H 2016 actual DPU of 4.39 cents announced on 28 July 2016 and adjusted 3Q 2016 DPU of 1.89 cents.
6The aggregate leverage of 33.9% as at 30 September 2017 takes into account CCT’s proportionate share of its joint venture borrowings and deposited property value.