Sunday, July 22, 2012

CCT open to going into decentralised areas

Business Times: Sat, Jul 21

CAPITACOMMERCIAL Trust (CCT), which owns several CBD office properties, is open to venturing into Singapore's decentralised areas if it makes economic sense.

The trust manager indicated so at CCT's Q2 results briefing.

CCT posted distribution per unit (DPU) of 2.06 cents for the three months ended June 30, 2012, up 7.3 per cent from a year earlier. The trust, which makes semi-annual payouts, will give unitholders DPU of 3.96 cents for the first half, up 5 per cent year on year.

The H1 DPU figure reflects an annualised distribution yield of 5.98 per cent based on CCT's $1.33 closing price yesterday. The counter ended half a cent lower. Books closure date is July 31 and payment is on Aug 29.

Lynette Leong, CEO of CapitaCommercial Trust Management Ltd (CCTML), revealed that of all the trust's properties, Golden Shoe Car Park posted the highest valuation increase of 16.1 per cent in the latest June 2012 valuation exercise compared with six months ago.

"This is due to the fact that we have increased our car parking charges in our properties and Golden Shoe Car Park has the largest number (over 1,000) of car parking lots," said Ms Leong.

Despite an increase in season parking rates from $305 to $345 per month at Golden Shoe, there is a waiting list of about 300.

Carpark lots at Raffles City have been excluded from the recent rate hike.

Ms Leong expects CCT's carpark income (excluding Raffles City) of $11.7 million last year to grow by 7.5 per cent in 2012. She also announced that CCT is planning to implement a scheme at Golden Shoe where car owners enjoy exclusive reserved parking lots with security cameras, at $650 per lot per month.

CCTML officials said they will continue to scour the Singapore market for acquisition opportunities, with the city-area remaining the key focus as that is where they reckon asset values will hold up best. However, with the government actively promoting regional commercial hubs, the development of Singapore's MRT network and changes in workplace strategies, the trust is monitoring trends and does not discount the possibility of investing in decentralised areas if good-grade assets are available and if the economics makes sense.

CCT's gross revenue rose 5.2 per cent year on year to $95.8 million in Q2 2012 on the back of a full quarter's contribution from Twenty Anson, which was acquired on March 22 this year, upward revision of HSBC's rent at its namesake Collyer Quay building, bigger contribution from Raffles City, and higher yield protection income from One George Street.

However, this was partly offset by Six Battery Road posting lower occupancy (as it is undergoing refurbishment) and negative rent reversions, with new leases/lease renewals in the building signed at rents below expiring leases inked during the office market peak year of 2008.

Also affecting the trust's Q2 topline was loss of revenue from the shutdown of Market Street Car Park after June 30, 2011, for redevelopment to a Grade A office project, CapitaGreen.

Net property income rose 7.8 per cent to $75.2 million in Q2, helped by the revenue improvement along with lower property tax, on the back of a successful appeal on Six Battery Road, and this will continue to flow through for the rest of the year.

In Q2, CCT's 60 per cent-owned RCS Trust, which owns the Raffles City complex, completed negotiations with RC Hotels for the rent review of the master lease of the hotels and convention centre space in the complex. For the current November 2011 to November 2016 lease period, the base rent and service charge will have annual escalations and together, they are expected to contribute about 70 per cent of the asset's gross revenue and boost its cashflow stability. Variable rent is 8.5 per cent of gross operating revenue. In addition, RCS Trust has signed a forward lease renewal till 2036, subject to rent review every five years.

In the June 2012 valuation exercise, CCT's property portfolio was valued at $6.2 billion, up 1.1 per cent from six months ago.

CCTML also revealed that it had inked new leases and renewals for about 180,500 sq ft of office and retail space in the first half. Tenants involved include IntercontinentalExchange Inc and Cambridge Associates Asia for Six Battery Road, Toiji Trading and OptionsXpress for One George Street, and Mechel Carbon and Astra Oil Company at Raffles City.

An ongoing revamp at Six Battery Road, which remains in operation, is slated for completion by end-2013. Half of the 200,000 sq ft earmarked for upgrading this year has been completed in H1, of which 70 per cent has been leased.

CCT has no outstanding debt maturing this year and its low 30.1 per cent gearing puts it in a strong position, with ample debt capacity and financial flexibility, for future acquisitions and funding of ongoing asset-enhancement works and the CapitaGreen development, said Ms Leong.

CCT's adjusted net asset value per unit excluding the distributable income to unitholders was $1.58 at June 30, 2012, up one cent from end-2011.

OSK DMG has upgraded CCT to "buy" with a target price of $1.50, saying: "In view of possible room for growth in FY13, a low gearing of 30.1 per cent and a recent drop in the Singapore government 10-year bond to 1.36 per cent, we believe CCT is inexpensive at the moment, trading at 0.85 times price/book as compared to an average of 0.97 times for the Reit sector."

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G) | | | |

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