CapitaLand Integrated Commercial Trust (CICT)

[ashparagon]

Thanks for the information guys!

[kayhian]

SINGAPORE - Mainboard-listed CapitaMall Trust (CMT) said on Tuesday that its distribution per unit (DPU) for the first quarter ended March 31, 2015, rose 4.3 per cent to 2.68 cents from 2.57 cents a year ago.

The retail mall Reit said revenue increased 1.6 per cent to $167.4 million while net property income was up 3 per cent at $117.7 million.

Distributable income for 1Q 2015 was $92.9 million, a 4.2 per cent increase over $89.1 million a year ago.

Net asset value rose to $1.83 at March 31 from $1.81 at Dec 31, 2014.

- See more at: http://www.straitstimes.com/news/busines...rC2Cr.dpuf

[kayhian]

CapitaMall Trust: Resiliency amid challenges

CapitaMall Trust (CMT) reported its 1Q15 results which met our expectations. Gross revenue inched up 1.6% YoY to S$167.4m, while DPU grew at a stronger pace of 4.3% to 2.68 S cents. During the quarter, CMT managed to obtain positive rental reversions of 6.1%. Another encouraging sign came from the second consecutive quarter of YoY increase in both its shopper traffic and tenants’ sales psf. In terms of financial position and capital management, CMT’s aggregate leverage ratio remains healthy at 33.8%, while ~98.3% of its total debt are on a fixed rate basis or have been hedged. Given this set of in-line results, we are keeping our forecasts intact. Reiterate our HOLD rating and S$2.21 fair value estimate on CMT. The stock is currently trading at FY15F P/B ratio of 1.23x and distribution yield of 5.0%, which do not appear compelling, in our view. (Wong Teck Ching Andy)

[Boon]

CMT exploring how to unlock Funan's space value

Rennie Whang
The Straits Times
Saturday, Jul 18 2015

CapitaLand Mall Trust (CMT) may finally be closer to unlocking the value of its additional gross floor area at Funan DigitaLife Mall after years of speculation on the space.

In a Singapore Exchange filing on Wednesday evening, the trust's manager said it is "exploring its options" with regard to the mall.

The options include disposing of or redeveloping the centre, it added.

The mall received provisional permission in 2007 to build a nine-storey commercial block of mostly offices to maximise unutilised GFA. These plans were put on the back burner due to the global financial crisis and weak sentiment.

According to last year's URA Masterplan, the plot ratio for Funan is 7, but currently it is built only up to about 4.3, noted Cushman & Wakefield research director Christine Li.

The extra 380,000 sq ft or so of unused GFA would likely be used for offices, said Mr Desmond Sim, CBRE head of research for Singapore and South-east Asia.

"There is a maximum threshold to how many levels of retail space make sense. Upwards of four floors, the rent one can command would be comparable to office rents."

Redevelopment is also an option as the mall's design may be inefficient for modern retail requirements, said Chestertons managing director Donald Han. "For example, as an IT mall, you have many goods lifts, which is not so effective in an age where everyone uses smartphones and desktops are no longer in demand... The basement area, usually dense in pedestrian footfall, has not been well-utilised as well, as it is mainly used as a carpark."

Funan's value was stated at $361 million as at Dec 31. It appears to have been performing worse than CMT's other assets. Its annual report last year showed it had the second-lowest rental reversion across all malls in the portfolio.

Its occupancy rate dipped from 100 per cent in 2012 to 97.9 per cent last year, while its net property income fell from $22.1 million in 2013 to $21.7 million last year.

Possible suitors could come from private equity, said Mr Han. CLSA Capital Partners, for example, bought retail and office development PoMo in 2011, later selling it to a joint venture between BS Capital and Enviro-Hub Holdings in 2013.

"There is a lot of private equity money that is hungry for retail assets, and there are not many of such assets with redevelopment potential in the central area," he said.

http://business.asiaone.com/news/cmt-exp...pace-value

(not vested)

[waiyip]

Hi guys, I notice that Capital Com is trading below its NAV. Do anyone knows what is happening? It seems as though they have good gearing ratio, WALE, interest coverage ratio and overall debt profile.

I noticed that the drop begin in January. Anyone knows why?

[CY09]

One possible details we have to be careful is the determination of NAV. The basis of CCT NAV is on the annual valuation of its properties and this is done by the rental income divided by the capitalization rate. The capitalization rate for office properties have been fantastic over the past few years due to a tight supply. However almost 600,000 new square meter of office space will be supplied in the next 1.5 years and on average 140,000 sq meter is absorbed annually on the demand side. Currently there is a vacancy rate of 9.8% (746k sq m unleased space vs total current supply of 7,583 sq m)

Coupled with pending rate hikes, it is likely the cap rate will be adjusted upwards to reflect this changes. Take for example CCT's "Six Battery Road" and "One George Street". In June 14, the cap rate was 3.75% and 3.85% respectively. However in FY 10, their cap rates were 4.00% and 4.15% respectively. Hence with a higher cap rate, valuations of the office buildings will go down. It is likely CCT will term its as revaluation loss and result in its NAV going down. Purely by cap rates revision, the NAV is expected to be reduced by about 5%.

Similarly, as mentioned of the mismatch between supply and demand in the near term, office rental space may be adversely affected, reducing net property income of each property. This too has a downward effect on the final valuation of the office buildings, pushing down the REITS NAV.

Lastly, it is not just CCT who is trading below NAV, Keppel REIT whose main focus is office space like CCT is trading below NAV. Please note mapletree commercial trust while it sounds like an office REIT is in two segments of office and retail ( a combination of Capital commercial + capitamall trust).

To summarise, the reason why CCT is trading below NAV is due to the negative outlook of office space.

[csl123]

The percentage of leases (based on income) expiring in 2015 and 2016 is 6% and 13% respectively. The average rent (in S$/psf) of lease expiring is S$8.94 and S$9.83 respectively. Given that current market rents for Grade A office in Raffles Place is around S$10 - S$11, its is very unlikely new commited rental will dip below S$9.00. Rental for Grade A market is ~S$8.00 psf in 2009-2010 during GFC.
Furthermore, Capitagreen is already 80% NLA committed, and will contribute positively to the trust in 2016.

Assessment is that downside risk is limited, with a valuation of ~ S$1.20 - S$ 1.30 .

Source: CCT Analyst Presentation for Q2 2015 Results

(Recently Vested)

[CY09]

Not optimistic in their ability to obtain rents in the $10 region in 2016.

I have written on my blog yesterday about the impending office oversupply and how it will affect NAV of office REITS and profits

http://investmoolah.blogspot.sg/2015/09/...t-are.html

Similarly, channelnewsasia posted analysts views today echoing similar sentiments today on office rental rates. If rentals are to fall by 20%, office rental rates will be $8.50 and is likely to persist until 2019. This means right now the income support and locked in rates are what is propping up income for CCT and Keppel. My personal estimate is that value of office buildings are set to fall by 20-25%. This means CCT gearing is likely to stay in the region of 35-40% and the purchase of capitagreen will be mainly through equity raising because MAS stipulates a limit of 45% gearing.

I do not think purchasing capland 60% stake of capitagreen at 1.01 billion will be a good proposition for CCT unitholders. It will benefit the parent company only

http://www.channelnewsasia.com/news/busi...27112.html

[gzbkel]

Not optimistic in their ability to obtain rents in the $10 region in 2016.

I have written on my blog yesterday about the impending office oversupply and how it will affect NAV of office REITS and profits

http://investmoolah.blogspot.sg/2015/09/...t-are.html

Similarly, channelnewsasia posted analysts views today echoing similar sentiments today on office rental rates. If rentals are to fall by 20%, office rental rates will be $8.50 and is likely to persist until 2019. This means right now the income support and locked in rates are what is propping up income for CCT and Keppel. My personal estimate is that value of office buildings are set to fall by 20-25%. This means CCT gearing is likely to stay in the region of 35-40% and the purchase of capitagreen will be mainly through equity raising because MAS stipulates a limit of 45% gearing.

I do not think purchasing capland 60% stake of capitagreen at 1.01 billion will be a good proposition for CCT unitholders. It will benefit the parent company only

http://www.channelnewsasia.com/news/busi...27112.html

Hello CY09, thanks for sharing your thoughts.
I am not sure about Keppel, but Capitacomm seems fine to me.

According to the 2Q results, the total yield stabilization received for 1H is 0.4 million, which is negligible.
The current average portfolio rental is $8.88 psf, which is not that far from your estimate of $8.50.
Increasing income from CapitaGreen should help to offset the coming downtrend in rental.

[butcher]

One of the least geared REIT, should have a safe buffer against rising interest rate impact on its gearing limit