CMT – BT

CMT to invest $150m to spruce up The Atrium

Singapore’s largest Reit posts 7.5% rise in distributable income for Q2

CAPITAMALL Trust (CMT) yesterday posted a 7.5 per cent year-on-year increase in second-quarter distributable income and unveiled plans to invest about $150 million in asset enhancement works at The Atrium @ Orchard. The amount is expected to be expended over a period of about two years.

The first three levels of The Atrium will be converted to retail use and linked to Plaza Singapura to create a seamless shopping experience. A canopy will be built along the open plaza between the two properties to maximise their combined 170-metre-long frontage along Orchard Road.

CMT has appointed RSP Architects Planners and Engineers as architect and Benoy as concept consultant for the asset enhancement works.

However, CMT officials stressed that the plans are still subject to approval from the authorities. ‘One variable is Stamford Canal (which runs below the two properties). Hopefully, there will not be too many technical conditions imposed by the authorities with regard to Stamford Canal,’ Simon Ho, CEO of CapitaMall Trust Management Ltd (CMTML), said at a results briefing yesterday.

Technical plans for The Atrium’s spruce-up have yet to be finalised but CMTML hopes to start work by early next year and complete them in Q3 2012.

Mr Ho also highlighted that CMT hopes to participate in greenfield mall development projects. The shopping centre Reit can potentially undertake development works of up to $800 million or 10 per cent of its $8 billion asset size, the limit for property development set under the Monetary Authority of Singapore’s guidelines for property fund.

At Funan, CMT has obtained outline planning permission to build an extension with about 300,000 square feet gross floor area of office space but there are no immediate plans to embark on the project as it may not be viable just yet.

CMT revalued its portfolio of properties at end-June 2010, which showed a $92.7 million fall compared with end-2009.

The slide was caused by a $127 million or 17.8 per cent fall in the valuation of The Atrium – understood to be due to lower office rental reversion assumptions. As a result, adjusted net asset value per unit (excluding distributable income) fell from $1.54 at end-2009 to $1.50 at June 30, 2010.

However, the fall in value of properties does not affect CMT’s distributable income to unitholders, which was $73.05 million for Q2 this year, up 7.5 per cent from Q2 last year. In addition to higher rental rates for new and renewed leases, lower property operating expenses also boosted distributable income.

Distribution per unit (DPU) for Q2 2010 was 2.29 cents, reflecting a 7.5 per cent year-on-year improvement as well as 1.4 per cent increase from the forecast based on CMT’s circular dated March 24 this year.

Gross revenue rose 2.8 per cent year on year to $142.5 million in Q2 2010. Net property income increased 5.3 per cent to $98.8 million.

For the first half, distributable income to unitholders improved 10.4 per cent year on year to $144.2 million on the back of 3.1 per cent growth in gross revenue to $281.6 million.

CMTML has retained about $9.5 million income in Q1 as a precautionary measure, given that 365 leases are due for renewal in the second half. But this will be distributed to unitholders by full year.

DMG & Partners Securities said in a report: ‘…We believe the retained earnings would be paid out in 2H 2010 to smoothen out any probable decline in DPU as a result of weaker rental reversions (in second half).’

For the 323 leases that were renewed in H1, CMT achieved 6.3 per cent average positive rental reversion.

CMT has completed refinancing its borrowings due this year and will now explore options to trim its $1 billion refinancing exposure for next year.

Total capital expenditure for asset enhancement works at JCube (formerly Jurong Entertainment Centre) is now projected at $165 million, down from $200.3 million originally, due to lower construction costs.