CCT – UOBKH

Renew long-term lease with HSBC

CapitaCommercial Trust (CCT) has entered into a 7-year renewal lease agreement commencing 30 Apr 2012 (after expiry of existing lease) and expiring on 29 Apr 2019 for total contract value of S$143.1m. The lease agreement involves capex of S$7m to be incurred by CCT for improvement work on HSBC Building, which is expected to commence in late-2008. We estimate that the contract value of S$143.1m represents average rental of S$8.50psf pm, much higher than existing passing rent of S$3.63psf pm from HSBC Building. HSBC will bear most property operating expenses such as maintenance, utilities and property tax for HSBC Building. We view the renewed contract as a positive development although HSBC Building contributes only 3.1% of revenue in 1Q08.