CCT – BT

CCT distributable income up 7.9% in Q3

But revenue slides on sale of Robinson Pt, StarHub Centre

CAPITACOMMERCIAL Trust (CCT) has reported a 4.7 per cent year on year drop in third-quarter gross revenue on account of the sale of Robinson Point and StarHub Centre. But it still managed a 7.9 per cent year on year rise in distributable income, thanks to lower property tax and interest savings as a result of lower borrowings.

The trust now had cash and cash equivalents of $730.9 million at end-September – more than double the $312.5 million at Dec 31, 2009. The increase was on the back of $577 million of net proceeds from the sale of the two buildings this year. CCT has not distributed the sales proceeds, saying it intends to retain them for growth opportunities and/or to repay debt.

‘The trust will continue to extract value from the portfolio through pro-active asset enhancement initiatives,’ said Richard Hale, chairman of CapitaCommercial Trust Management Ltd (CCTML).

‘We are actively sourcing for good quality assets that will complement our existing portfolio. We will also maintain a disciplined approach towards using the divestment proceeds, with careful consideration to the impact on the trust’s balance sheet and yield, and unit-holders’ returns.’

Standard Chartered Bank said in a report yesterday that after divesting the two non-core assets, CCT has $2.3 billion of unencumbered assets plus the $730.9 million of cash. ‘We believe CCT can invest around $2 billion without issuing new equity,’ said Stanchart. ‘Potentially, CCT could redevelop Market Street carpark for about $1 billion, which could provide a yield on cost of 5.5-8 per cent. CCT may also buy assets in Singapore, including 50 Collyer Quay for $1 billion or Asia Square for $2.2 billion, without issuing equity. These could be yield-accretive given current low interest rates of about 2.5 per cent versus a prime office capitalisation rate of 3.5 per cent.’

CCT’s gearing ratio has fallen – from 32.8 per cent in Q2 2010 to 31.5 per cent in Q3 2010. ‘We have completed all refinancing due in 2010 and are already exploring options to refinance the borrowings due in future years,’ said CCTML’s CEO Lynette Leong. CCT has total gross debt of about $1.9 billion, including $850 million due next year and $713 million due 2012.

For Q3 ended Sept 30, 2010, gross revenue fell 4.7 per cent year on year to $97.8 million. Net property income dipped one per cent to $76.3 million, but distributable income rose 7.9 per cent to $56.2 million. Distribution per unit (DPU) for Q3 works out to $1.99 – a year on year rise of 7.6 per cent.

On an annualised basis, the Q3 DPU translates to a distribution yield of 5.5 per cent based on CCT’s Oct 20 closing price of $1.44 per unit. The counter closed one cent higher at $1.45 yesterday. There is no distribution payment for Q3 as the trust distributes semi-annually.

CCTML said it signed new leases and renewals for about 138,000 sq ft in Q3, taking the figure for the first nine months to 560,000 sq ft. New tenancies sealed in Q3 included Ai Mien Bar Holding, which will operate a chic Chinese restaurant featuring seasonal and regional flavoured noodles on the ground floor of Capital Tower, and AXA Rosenberg Investment Management Asia Pacific, at One George Street.

Lease renewals in Q3 included Neste Oil Singapore and Orix Investment & Management, at Raffles City, and Robert Walters (Singapore) at Six Battery Road.

CCTML said asset enhancement works for Six Battery Road will kick off next month, with the main lobby getting a face-lift first. Growth in demand for prime and Grade A office space is expected to continue into the current quarter and 2011, it said. ‘As a result, there is less concern that large volumes of secondary stock will be left unoccupied when some major tenants relocate to newer buildings in the Marina Bay area.

‘Pre-leasing for the newer office space scheduled for completion in 2011 remains strong, indicating that the overall positive momentum in the Singapore office market will likely be sustained even with the increase in office stock from the completion of the new office buildings.’

For the first nine months, CCT posted a 0.1 per cent year on year drop in gross revenue to $299.8 million. Net property income rose 3.6 per cent to $228.1 million, while distributable income increased 14.2 per cent to $166.3 million. DPU rose 13.7 per cent to 5.89 cents.