CCT – BT
CapitaCommercial Trust to buy Wilkie Edge from CapitaLand
Proposed acquisition comes as CCT posts 84.7% rise in Q2 income to $29.3m
CapitaCommercial Trust (CCT), which yesterday posted an 84.7 per cent jump in Q2 group distributable income to $29.3 million, is buying Wilkie Edge, a mixed development coming up on the former Selegie Complex site, from parent CapitaLand.
And the trust is not ruling out buying over CapitaLand’s stakes in other Singapore office buildings to grow its local portfolio, David Tan, CEO of CapitaCommercial Trust Management Ltd (CCTML), indicated yesterday.
CapitaLand owns 55 per cent of Chevron House (formerly Caltex House), 50 per cent of Hitachi Tower and 50 per cent of 1George Street (the last through the Eureka Office Fund) here.
The proposed acquisition of Wilkie Edge also reflects an extension of CCT’s strategy, from buying only completed buildings to acquiring buildings under development on a pre-commitment basis and taking direct stakes in development projects, both in Singapore and abroad, CCTML chairman Richard Hale said.
But market watchers say that probably the most compelling growth story for the trust, which is one of Singapore’s biggest office landlords, is that it is poised to take advantage of the robust office rental growth over the next two years, with more than half of its office portfolio up for renewal in 2008-2009.
CCT owns Capital Tower, 6Battery Road, Raffles City complex (60 per cent), HSBC Building, Robinson Point and StarHub Centre.
The buoyant office market helped the group to chalk up a $730.2 million increase in valuation of its properties in six months, from $3.8 billion as at Dec1, 2006, to $4.6 billion as at June1, 2007. ‘As the prospects of office market rentals in Asia remain positive, CCT will look at acquiring commercial assets in Asia including Vietnam,’ CCT said.
The acquisition of Wilkie Edge, which is under construction, will boost CCT’s portfolio to about $4.8 billion.
The 12-storey development, being built on a 99-year leasehold site, will comprise about 103,200 sq ft net lettable area of offices, 36,500 sq ft of retail space, and 154 serviced apartments when it is completed late next year.
CCT said the purchase consideration for Wilkie Edge is $262 million. CCT is granting CapitaLand and/or its nominee an option to lease the serviced apartments for the remainder of the 99-year leasehold tenure less one day, for a $79.3 million consideration. If the option is exercised, the purchase consideration to CCT will be reduced to $182.7 million or about $1,313 per square foot of net lettable area for the office, and retail components as well as the common areas including car parks.
In September last year, CapitaLand’s serviced residences arm The Ascott Group inked a memorandum of understanding to manage Wilkie Edge’s serviced residences for an initial 10-year term with an option for a further 10 years.
Market watchers say they would not be surprised if either Ascott or its associate Ascott Residence Trust exercises the option to purchase Wilky Edge’s serviced residence component.
The 85 per cent year-on-year rise in the trust’s distributable income for Q2 ended June30, 2007 was due to the yield-accretive acquisition of Raffles City in September 2006 and higher office rents. Renewals and new leases in the group’s office portfolio in the first half of this year were at 99.8 per cent and 124.3 per cent respectively higher than preceding rental rates.
Gross revenue (at group level) for Q2 rose 91.1 per cent from $31.1 million to $59.4 million. Net property income increased 82.7 per cent to $43.5 million. Distribution per unit (DPU) for Q2 was 2.12 cents, up from 1.77 cents in the same year-ago period.
The latest Q2 DPU works out to an annualised figure of 8.50 cents, reflecting an annualised distribution yield of 2.9 per cent based on CCT’s closing price of $2.95 yesterday.
For the first half of this year, DPU was 4.23 cents, reflecting an annualised figure of 8.53 cents, surpassing the 7.60 cents forecast for the whole of 2007 based on CCT’s circular in August last year.