CMT – BT

CMT posts higher income for Q2

H1 income also up, due mainly to contributions from Clarke Quay, Iluma

CAPITAMALL Trust (CMT), Singapore’s pioneer real estate investment trust (Reit), posted year-on-year improvements in its second-quarter and first-half 2011 results, riding on contributions from its acquisitions of two malls in the city area – Clarke Quay and Iluma.

The Reit manager also highlighted that its city malls, which include Raffles City (40 per cent owned by CMT) and Clarke Quay, have outperformed its portfolio in terms of improving shopper traffic and tenant sales in the first half of 2011. For instance, H1 2011 saw year-on-year increases in tenant sales of about 12 per cent for Clarke Quay, 7.1 per cent for Raffles City, 14.6 per cent for Bugis Junction and 14 per cent for Funan – outpacing an 8 per cent rise for CMT’s portfolio.

Simon Ho, CEO of CapitaMall Trust Management Limited (CMTML), said: ‘The tourist numbers we are seeing (in Singapore) are flowing into our city malls.’

About 50 per cent of Clarke Quay mall’s visitors are tourists, he added. The mix of suburban to city malls in terms of gross revenue of CMT’s portfolio is 75:25. Mr Ho said the trust is not likely to veer too far from this mix, pointing out that suburban malls tend to be more resilient, whereas city malls have ‘a fair bit of tourist component and with it comes a higher level of volatility’.

CMT completed the acquisition of Clarke Quay on July 1, 2010 and that of Iluma on April 1 this year. Mr Ho also revealed that the trust will invest about $20-30 million improving Junction 8 in Bishan over the next few years.

Works include installing a glass canopy to create a seamless connection to the MRT station and alfresco dining area. ‘This will spruce up the mall and also encourage F&B operators to trade longer hours,’ said Mr Ho.

Over at Iluma, the trust is allowing some early pre-termination of leases to facilitate a revamp of the mall. Proposed enhancement works will include adding an LED screen to Iluma’s distinctive facade. The refurbishment could cost about $30-40 million and the plan is to start before year-end and complete the works next year. CMT hopes to ink leases with major fashion names from Japan, the US and Europe, Mr Ho said.

In Jurong East, the group is pumping in $165 million to redevelop the former Jurong Entertainment Centre site into JCube. About 80 per cent of the space in the new mall has already been committed, ahead of its planned opening in Q1 next year.

Over at Orchard Road, the group is investing $150 million to convert the first three levels of The Atrium @ Orchard to retail space and link it to the next-door Plaza Singapura. A canopy will be built along the open plaza between the two properties and the retail space in the two properties will be integrated under the Plaza Singapura name. The name Atrium may continue to be used for the remaining office floors in the development. Work will be competed by end-2012.

ION Orchard – in which CMT’s sponsor, CapitaMalls Asia, has a 50 per cent stake – has stabilised as an asset for potential acquisition and CMT would be interested in the mall when CMA is ready to sell. Sun Hung Kai owns the remaining 50 per cent in the prime mall, which began trading in 2009.

For Q2 ended June 30, 2011, CMT posted a 3.1 per cent year-on-year rise in distributable income to unitholders to nearly $75.5 million. Gross revenue rose 12 per cent to $159.6 million. Net property income improved 7.7 per cent to $106.4 million.

For the first-half ended June 30, CMT’s gross revenue rose 11.4 per cent to $313.5 million, while net property income increased 7.9 per cent to nearly $212.1 million.

Distributable income to unitholders increased 2.9 per cent year-on-year to $148.7 million in H1 2011, after retaining $5.1 million of tax-exempt income received in Q1 2011 from CapitaRetail China Trust (CRCT) for the H2 2010 period and $4.4 million of CMT’s Q1 2011 taxable income.

CMT had earlier retained $8.8 million received from CRCT last year and Mr Ho yesterday gave a firm commitment that CMT will distribute 100 per cent of its FY 2011 taxable income.

Besides the contributions from the two new acquisitions – Clarke Quay and Iluma – CMT’s results also received a fillip from higher rental rates achieved from new and renewed leases and staggered rentals.

A total 269 leases were renewed in H1 2011 at rental rates that on average were 7.8 per cent higher than preceding rates, typically committed three years earlier.

CMT is making a payout of 2.36 cents per unit to unitholders for Q2, translating to an annualised distribution yield of 4.89 per cent based on CMT’s $1.935 closing price yesterday.

CMT’s gearing ratio stood at 39.5 per cent as at end-June 2011, up from 35.9 per cent at end-December 2010. Net asset value per unit (excluding distributable income) stood at $1.55 at end-June 2011, or 2 cents higher from $1.53 at end-December 2010.

With its refinancing of debt due in 2011 completed, CMT does not have any more debt maturing until October 2012.