Month: July 2011
Cambridge – BT
CIT’s Q2 distributable income rises 14%
CAMBRIDGE Industrial Trust’s (CIT) distributable income rose 14 per cent to $12.3 million for the second quarter compared to a year ago.
Its distribution per unit (DPU) for the three months to end-June was 1.036 cents, down 16.3 per cent from 1.238 cents in Q2 2010.
Compared to the distribution of 1.001 cents per unit in Q1 this year, its DPU rose 3.5 per cent. The latest distribution will be paid on Aug 25, the trust’s manager said.
Despite an expected slowdown in economic growth in the second half of the year, CIT’s manager said that it expects to be able to deliver ‘a stable and secure income stream to its unitholders by maintaining high occupancy levels of its existing properties and acquiring new properties that enhance CIT’s distributions’.
Revenue for the industrial real estate investment trust climbed 6.6 per cent to $19.5 million in Q2 compared to the same period a year ago, mainly due to higher rental income after the acquisition of five properties from September last year to June this year.
Its net property income – after deducting land rents, fees, taxes and other property expenses – rose 4.9 per cent to $16.9 million, from $16.1 million a year earlier.
Non-property expenses nearly doubled to $14.1 million, from $7.3 million a year ago, due mainly to a sharp rise in borrowing costs from $5.7 million to $12.4 million.
That increase was mainly due to accelerated amortisation of fees and costs related to a $303.1 million syndicated term loan that was refinanced with a new $320 million term loan in June, and break costs associated with the refinancing.
For the first six months of the year, CIT’s distributable income rose 10.7 per cent to $24.2 million, as revenue rose 5.2 per cent to $38.8 million.
The trust had total assets of $1.097 billion at the end of June, up from $1.001 billion at end-2010.
Its portfolio at end-June comprised 45 properties with 657,749 square metres of lettable area, leased to 105 tenants. The total portfolio value was about $1.003 billion. The average occupancy rate for its properties in Q2 was 99.02 per cent, with a weighted average lease to expiry of 3.7 years.
CIT units last traded at 50.5 cents yesterday before the earnings announcement, up half a cent from Monday’s closing price.
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.
K-REIT – DBSV
Growing its Australian portfolio
• 2Q DPU of 1.93cts in line with expectation
• Forward purchase of 8 Chifley Square Sydney will grow DPU by 0.9%/3.4% in FY 11/12
• Maintain Hold and DCF-based TP of $1.32
In line with expectations. 2Q gross revenue and NPI declined by 22.2% to S$18.1m and S$14.3m respectively due to the sale of KTGE Towers but remained relatively stable qoq. The 250% increase in associates’ contribution (one-third stake in MBFC phase 1) lifted distributable income to $26.3m (+19.7%), translating to a DPU of 1.93cts. Operationally, portfolio occupancy remained fairly robust at 98% with Marina Bay Link Mall’s occupancy rising from 87% to 95%.
Forward purchase of 8 Chifley Square, Sydney. Meanwhile, K-reit announced the acquisition of a 50% stake in 8 Chifley Square from Mirvac Group. The prime Grade A office building with NLA of 205,700 sf within Sydney’s prime CBD area, will be completed in 2013. The estimated acquisition price is set at a min of A$154 m to a max of A$169m (S$203m – S$223.3m) based on a 6.65% net yield pegged to a net base rent of A$1,050 psm p.a. The purchase consideration, fully funded by debt at a cost of SOR + 50bps, will be paid in 9 tranches till completion. K-reit is expected to make its down payment of AUD S$ 24.5m (S$32.2m) soon. The subsequent 7 tranches of A$16.3m (cS$21.5 m) will be made on a quarterly basis, commencing on 1 Jan’12. The final payment, upon completion, will be subjected to the actual NPI of the building to incentivise the vendor to maximize operational performance. Meanwhile, the reit will also received income upon each payment.
Downside protection structure. The vendor has undertaken to top up any shortfall for a period of 5 years to the agreed 6.65% yield. We understand that management is currently in talks with 2 major tenants to take-up 70% to 80% of space.
Maintain Hold at an unchanged TP of S$1.32. While the acquisition will benefit K-Reit in the longer term and improve the portfolio quality, initial impact on earnings and valuation is limited in our view. FY11/FY12 DPU accretion from this purchase is estimated at 0.9% to 3.4%, while DCF-backed TP remains unchanged at $1.32. Gearing is estimated to increase to c.42% post-acquisition.
CMT – DMG
Higher than expected debt cost
2Q11 DP U below expectation by ~6%. CapitaMall Trust (CMT) reported 2Q11 DPU of 2.36S¢ (+3.1% QoQ; +3.1% YoY), equivalent to 23% of our FY11 DPU estimate. Main reason for below expectation DPU was attributable to higher than expected interest expense and debt-related transaction cost which amounted to S$34.6m in 2Q11 (+6.6% QoQ, +5.4% YoY) vs our FY11 interest expense estimate of S$95m. On the other hand, net property income rose 7.7% YoY to S$106m (+0.7% QoQ) mainly due to new contributions from Clarke Quay (acquired in Jul 2010) and Illuma (acquired in Apr 2011), and higher rental rates achieved from new and renewed leases. Following our interest expense revision upwards by ~21%, our FY11-12 DPU are reduced by 7.6-4.7% respectively. Consequently, our TP is lowered to S$1.94, derived based on DDM (COE: 8.0%, terminal growth: 2.0%). Maintain NEUTRAL.
Positive rental reversion continues. CMT continues to enjoy positive rental reversion at 7.8% in 2Q11 (vs 7.5% in 1Q11). Given that ~8.2% of portfolio NLA will be up for renewal in 2H11 (~402k sqft), we believe CMT will be able to reap further benefit from positive rental reversion. However, due to abundant supply coming on stream outside central region estimated at ~3.6m sqft during 2H11- 2015, we expect the rate of growth of spot rents to decline gradually for certain suburban areas. Nonetheless, we expect CMT to benefit from further positive rental reversion on the back of expiring leases in FY12-13 at 33.1-32.8% of total gross rental income for Mar 2011 respectively.
Leasing commitment hit ~80% for JCube; more AEI in the pipeline. Asset enhancement work for JCube is scheduled to be completed by 1Q12. With ~nine months to go, we view the pre-commitment lease of 80% as encouraging. Our current forecast has factored in contribution of JCube in FY12. Once operational, JCube will add another 204k sqft of NLA to CMT’s portfolio (~4.0% of current portfolio). Separately, CMT intends to undertake asset enhancement works on Illuma which will cost ~S$30m. More details on the Illuma AEI work will be revealed later on.
K-REIT – CIMB
Expanding presence in Australia
• DPU in line; maintain NEUTRAL. K-REIT’s 2Q11 DPU of 1.93 S cts met both our and consensus expectations as it came in at 26% of our full-year forecast, taking 1H11 DPU to 49% of forecast. There were no major surprises. K-REIT also announced the A$154m-170m forward purchase of a 50% interest in 8 Chifley Square in Sydney. The acquisition will be structured to provide a steady 6.65% yield. Fully funded by cheap local debt, the acquisition should be DPU-accretive. But there are risks associated with going overseas and with a rise in aggregate leverage to above 40% on a full debt drawdown for the purchase. Factoring in the acquisition, we raise our FY12-13 DPU estimates by 2-5%. But our DDM-based target price is trimmed from S$1.52 to S$1.49 as we raise our cost of equity to 7.5% to factor in higher overseas exposure. We remain NEUTRAL.
• No surprises from 2Q11 results. 2Q11 distributable income rose 20% yoy as higher contributions from its acquisitions in 2010 and early 2011 more than offset the loss in contributions from Keppel Towers and GE Tower which have been disposed of. Distributable income increased 8% on qoq basis.
• Occupancy of local portfolio remains strong. Occupancy remained full for all local office assets except MBFC (97%) and Prudential Tower (98%). Occupancy of 77 King Street also improved to 88% from 72% in the last quarter. The effects of negative reversions were moderate and were compensated by higher occupancies. Management also continues to see good tenant demand for its office assets.
• Australian property purchase. K-REIT announced the forward purchase of 50% interest in the yet-to-be-completed 8 Chifley Square in Sydney, Australia for A$154m-170m (S$203.0m-223.3m). The deal will be structured to provide a steady 6.65% yield. Fully funded by cheap local debt, the acquisition will be DPU-accretive though we are not excited as it offers fairly similar spreads (against the risk-free rate) as local assets. Also, there are increased risks associated with going overseas and with a rise in aggregate leverage climbing to above 40% on full debt drawdown for the acquisition.