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Reit reports 23% rise in Q2 distributable income to $36m

CAPITACOMMERCIAL Trust (CCT) says it is ‘open to all options’ when it comes to plans for Market Street Car Park (MSCP), and these include selling the site.

The update was given at CCT’s results briefing yesterday. Supported by strong rental reversions, the trust reported distributable income of $36.06 million for the second quarter ended June 30, 2008, up 23.2 per cent from the same period last year. Q2’s distribution per unit (DPU) of 2.6 cents is 22.6 per cent higher than in Q2 2007.

CCT has obtained outline planning permission from the Urban Redevelopment Authority to redevelop MSCP into an office tower for $1 billion to $1.5 billion.

In April, CCT manager CapitaCommercial Trust Management Limited (CTML) said that it was evaluating the project’s financial viability and funding structure, and would not decide on redevelopment anytime before mid-2009. It cited the project’s size, rising construction costs, financial market volatility and the uncertain development premium as reasons for the deferment.

Responding to a query on whether CCT would consider selling MSCP instead, CTML’s chief executive Lynette Leong said: ‘We are open to all options.’

According to her, the development premium remains uncertain, and construction costs are still rising.

Ms Leong pointed out that the redevelopment decision may still be subject to unitholders’ approval. Even if they were to reject the proposal, MSCP’s value has risen because of its redevelopment potential. ‘If it makes sense to sell it, why not? We will not rule out that option,’ she said.

For H1 2008, CCT’s distributable income of $71.92 million also outperformed the year-ago period’s by 22.9 per cent. This translates to a DPU of 5.19 cents, which is 22.7 per cent more than in H1 2007 and exceeds the manager’s forecast by 4.2 per cent.

The annualised H1 2008 DPU of 10.44 cents represents a distribution yield of 5.5 per cent based on Tuesday’s closing unit price of $1.91.

‘The outstanding numbers were largely driven by strong organic growth due to the prime quality of our assets augmented by our proactive leasing and the high standard of our property management,’ said Ms Leong.

Lease renewals and new leases contracted in H1 2008 for CCT’s office space registered an average rental rate increase of 193 per cent over last contracted rates, and there is still potential upside. ‘Many of our expiring leases have rentals that are significantly below market and are being reviewed to market as they renew,’ she said.

CCT’s gearing ratio as at July 11 was 35.7 per cent, and this took into account the acquisition of 1 George Street. The property will contribute to CCT’s income from Q3 2008, and brings its asset size close to $7 billion today.

In its latest asset valuation exercise, CCT’s portfolio as at June 1 stood at $5.57 billion, about $463 million higher than at Dec 1, 2007. The portfolio comprised CCT’s existing properties, its 60 per cent interest in Raffles City through RCS Trust, and excludes 1 George Street.

‘Given Singapore’s attractiveness as a global city and tight office supply, we are confident of exceeding our forecast DPU of 10.61 cents for the financial year ending 2008,’ said CTML’s chairman Richard Hale.

CCT will continue to seek quality and yield accretive assets, though at a more deliberate pace, given the current market environment.

CCT units rose 3.7 per cent or seven cents yesterday to close at $1.98.

Source : Business Times - 24 Jul 2008

THE robust economy - and the rent increases it delivered - allowed CapitaCommercial Trust (CCT) to deliver a bumper result yesterday and bask in a rising share price.

Distributable income for the June quarter shot up 23.2 per cent from a year ago to $36.1 million. Investors will benefit from a 22.6 per cent rise in distributions to 2.6 cents per unit.

Gross revenue climbed 25 per cent to $74.4 million while net property income rose 18.6 per cent to $51.5 million.

The strong results sent the shares up seven cents to $1.98.

Mr Richard Hale, the chairman of CCT’s manager, said Singapore’s economic performance had driven the trust’s higher net asset value and rental revenue for the three months to June 30. He also cited the ’still steady office demand underpinned by the country’s solid economic fundamentals’.

Mr Hale tipped that the good times will roll for a while yet: ‘Given Singapore’s attractiveness as a global city and the tight office supply, we are confident of exceeding our forecast distribution per unit of 10.61 cents for the financial year ending 2008.’

CCT achieved a distributable income of $71.9 million and a distribution per unit of 5.19 cents for the first six months of the year.

The annualised first-half distribution per unit of 10.44 cents would provide a distribution yield of 5.5 per cent, based on the July 22 closing price of $1.91 per unit.

CCT’s total asset size is now close to $7 billion - following its July 11 completion of the $1.165 billion purchase of 1 George Street, ahead of its 2009 target size of $6 billion. The trust said its gearing is at a prudent 35.7 per cent.

New leases and renewals contracted over the first half of the year registered average rent increases of 193 per cent for office space and 52 per cent for retail, said Ms Lynette Leong, the chief executive of CCT’s manager.

Ms Leong said there remains ‘considerable potential’ rental upside as the prevailing rents of leases not yet due for renewal are still substantially below market rates.

Despite slower economic growth and increased stagflation fears, office rents continued to rise in the second quarter, albeit at a slower rate. They averaged $18.80 per sq ft (psf) per month for Grade A space and $16.10 psf for prime space.

While some property consultants have said that office rents are peaking, CCT remains confident.

‘Notwithstanding the current weak macroeconomic sentiments, demand for space in our portfolio, especially by the financial institutions and supporting business services, remains continually steady,’ said Ms Leong.

Moody’s Investors Service recently downgraded CCT’s A3 corporate family rating to Baa1, and its Baa1 senior unsecured ratings to Baa2, which reflects the entirely debt-funded nature of its purchase of 1 George Street.
 
Source : Straits Times - 24 Jul 2008

But CEO warns of impact from global slowdown

SERVICED apartments owner Ascott Residence Trust is offering a 9-per-cent higher dividend payout to unitholders for the second quarter after room rates increased.

It yesterday announced a total distributable income of $13.3 million, or 2.19 cents per unit, thanks to growth across its portfolio, which comprises 37 serviced-apartment residences across Asia.

“This comes on the back of good acquisitions last year, as well as good organic growth across the portfolio,” said Mr Chong Kee Hiong, chief executive of the real estate investment trust (Reit).

However, he said the next few months may prove to be more challenging for the serviced residences sector, as the external global slowdown impacts business travel. Hence, the Reit’s portfolio in Singapore, Japan, and the Philippines may see a slightly weaker performance for the second half of the year.

While the two residences here -Somerset Grand Cairnhill and Somerset Liang Court - have seen good growth because of high room and occupancy rates, Mr Chong said customers are “more cautious now”.

“Some of our tenants, instead of renewing for six or nine months, are doing it on a monthly basis,” he said. “With rates increased over the last two years, most companies have not increased their accomodation budget for staff. Some businesses have been displaced to condominium housing.”

Some markets that look attractive for acquisitions include emerging ones such as China, Vietnam and India, but for now, the Reit is focused on organic growth, said Mr Chong.

In China, the Reit’s performance has slowed due to shorter stays by business travellers as a result of more stringent visa entry requirements ahead of the Olympics. There has been a clampdown on convention business and some buildings and factories have also delayed their opening dates, so this has affected some tenants’ start date.

“Post Olympics, the Chinese authorities will be pro-business again,” said Mr Chong. He added that Ascott properties in Vietnam and Australia will also see better performance in the second half of the year.

Source : Today - 24 Jul 2008

CAPITACOMMERCIAL Trust, the office landlord run by CapitaLand, will pay investors 23 per cent more in dividends for the second quarter, as it earned more rental income.

Shareholders will receive $36.1 million, or 2.6 cents a share, for the three months ended June 30, from 2.12 cents a year earlier.

CapitaCommercial also expects to post higher income for the rest of the year, as it increases rents on leases expiring in 2008 and as it lowers interest costs.

Said its chairman Richard Hale: “Given Singapore’s attractiveness as a global city and tight office supply, we are confident of exceeding our forecast distribution per unit of 10.61 cents for the financial year ending 2008.”

The trust may follow CapitaLand in seeking to invest more in faster growing economies such as China and Vietnam.

“We will continue, though even more deliberatively given the current market environment, to seek quality and yield accretive assets,” said chief executive Lynette Leong. “A continued key focus is also the proactive and prudent management of our capital requirements.”

To finance its $1.17-billion purchase of a 23-storey office block called 1 George Street, CapitaCommercial will use debt such as convertible bonds.

“The trust’s gearing is at a prudent level of35.7 per cent and the interest cost for 2008 is about 95-per-cent fixed,” Ms Leong said. Bloomberg

Source : Today - 24 Jul 2008

First Real Estate Investment Trust said it will distribute 1.91 cents per unit for its fiscal second quarter, up about 16 per cent from the same period a year ago.

All in, First REIT will distribute S$5.2 million to unitholders.

The trust said its net property income grew about 15 per cent in the second quarter to about S$7.5 million. Gross revenue also rose 15 per cent to S$7.5 million.

The trust said it benefited from Asia Pacific’s growing healthcare and related medical industry.

The trust said it is optimistic it will continue to perform well in the second half, as its revenues are largely derived from long-term rental leases.

It also sees the current economic environment as an opportunity for making better acquisitions. - CNA/vm

Source : Channel NewsAsia - 22 Jul 2008