Author: tfwee
CMT – BT
CapitaMall Trust will pass tax rebates on to tenants
It will help tenants downsize their units, improve sales through marketing
CAPITAMALL Trust (CMT), which has pumped around $55 million into revamping Lot One Shoppers’ Mall at Choa Chu Kang, said yesterday that it will help its tenants cope with the economic slowdown through various ways.
‘We want the tenants to survive so that we can survive,’ president and CEO of CapitaLand Liew Mun Leong told the press. CapitaLand manages CMT through an indirect wholly owned subsidiary, CapitaMall Trust Management Limited (CMTML).
With the government giving out a 40 per cent property tax rebate for industrial and commercial properties this year in the Budget, CapitaLand has said that it will pass on rebates totalling $41.5 million to tenants in retail, commercial and industrial properties. This could translate to an estimated 4 per cent drop in rents, said Mr Liew.
Besides CapitaLand, other landlords such as Frasers Centrepoint Trust (FCT) have also said that they will pass on the benefits of the property tax rebate to their tenants.
But there is a fine balancing act between cutting costs for tenants and maintaining earnings. In the retail aspect, ‘the malls are invested by shareholders, the malls are also expected to have a return’, said Mr Liew.
So beyond dishing out rental rebates, CMT is monitoring retail sales and will help tenants in other ways, said the CEO of CMTML. Lim Beng Chee. Within the trust’s portfolio, discretionary spending on items such as telecommunication products and jewellery have fallen in 4Q 2008 compared with a year ago.
Tenants can consider downsizing or shifting to cheaper spots in malls, said Mr Lim. CMT will also help tenants improve sales through better marketing, said CapitaLand Retail’s deputy CEO, Simon Ho.
In Lot One for instance, comic book retailer Comics Connection has been saving $4,500 or more in rental every month since it moved into a smaller shop space located on a higher floor after the revamp.
The mall rejuvenation, which is almost complete, increased net lettable area by 6.6 per cent and also reconfigured several shop units to raise gross rent per month by 28.4 per cent. Monthly rents in the mall range from $5-$20 psf.
‘There is still a lot of scope for asset enhancement’ within the CMT portfolio and that will be the key strategy for growth in the next few years, said Mr Lim.
In last week’s Budget, the government also encouraged landlords to consider further rental adjustments and more flexible leasing and payment terms.
‘We are keeping a close tab on the situation and where necessary, will introduce appropriate measures in a timely manner to help needy tenants tide over their difficulties,’ FCT told BT.
PLife – BT
P-Reit expects prices of commercial property to fall
It will hold off making acquisitions until valuations are more ‘objective’
DESPITE having the capacity to do so, the manager of Parkway Life Reit said it will not be aggressive in acquisitions this year as it believes that commercial property prices will come down further.
‘If we wait out a bit longer, we will potentially be able to have a more opportunistic buy at a more objective valuation, as well as more objective yield,’ said Yong Yean Chau, the newly appointed chief executive of Parkway Trust Management, the Reit’s manager.
Revealing the strategy at its fourth-quarter results briefing yesterday, Mr Yong also said that acquisition targets are likely to be narrowed down to those in politically safer countries such as Singapore, Malaysia and Australia.
While China remains a core market, the Reit is likely to take a more cautious approach because of legal issues related with property ownership.
‘With limited gunpowder right now, we want to be more focused and more targeted rather than hitting everywhere,’ Mr Yong added.
As of Dec 31, Parkway Life Reit has a net gearing of 23.3 per cent, with a debt headroom of $300 million before reaching its optimal gearing of 40 per cent.
It also has $210 million worth of unutilised revolving credit facilities, and a $500 million multi-currency medium-term note programme which may be used to fund future acquisitions.
The Reit has secured credit facilities with an average tenure of 2.8 years. It has also hedged against fluctuating interest rates and foreign currency.
For Q4 ended December, Parkway Life Reit posted a 15.9 per cent rise in distributable income to $11.1 million, boosted by contribution from its Japanese acquisitions.
Revenue jumped 36.4 per cent to $16.2 million, of which $3.6 million came from its properties in Japan.
This brings distribution per unit (DPU) to 1.84 cents, from 1.59 cents in the year-ago period.
Property expenses went up to $1.1 million, from $762,000. Management fees rose 35.4 per cent to $1.5 million.
The Reit suffered a foreign exchange loss of $7.93 million, as a result of a loss on a foreign currency forward contract that was entered into to lock in the exchange rate for the Japanese yen.
‘However, as the foreign currency forward was locked in at the initial exchange rate at acquisition, from a net asset perspective, the loss is offset by an increase in the value of the Japan properties, as seen by a corresponding gain amounting to $8.7 million in the foreign currency translation reserve,’ it said.
Total distributable income for the full year came to $41.2 million, bringing annual DPU to 6.83 cents. There was no comparison with FY2007 as the Reit was only listed in August 2007.
For the whole year, gross revenue came to $53.9 million, the bulk contributed by the Singapore hospitals in its portfolio.
With annual rental review pegged at one per cent above the consumer price index, the rental income from the Singapore hospitals grew at 6.25 per cent.
a-iTrust – BT
Ascendas India Trust DPU rises 35% in Q3
ASCENDAS India Trust (a-iTrust) said yesterday that distributable income for its third quarter ended Dec 31, 2008 rose 36 per cent to $15.3 million, from $11.3 million a year earlier.
Distribution per unit (DPU) for Q3 rose 35 per cent to 2.02 cents. Distribution is semi-annual, so the Q3 distribution will be made with that of Q4. Including 3.47 cents already distributed for first-half FY 2008/09, the nine-month DPU comes to 5.49 cents.
Total property income for Q3 was $28.8 million – 7 per cent higher than the $27 million figure the previous year – while net property income grew 9 per cent to $17 million, from $15.7 million
Property income grew on the back of higher occupancy and resilient rental rates. Expenses grew at a slower pace mainly due to the fall in oil prices. As a result, net property income rose.
‘Notwithstanding current weak global economic conditions, a-iTrust’s portfolio occupancy edged up to 99 per cent from an already high level,’ said Jonathan Yap, chief executive of the trust’s manager. ‘Average portfolio rentals also improved since our last results announcement. These results demonstrate the portfolio’s resilience and appropriateness of its positioning vis-a-vis the target customers.’
a-iTrust’s portfolio comprises 4.8 million square feet of completed space in the key Indian cities of Bangalore, Chennai and Hyderabad. About 1.2 million sq ft of this space – or a quarter of a-iTrust’s current income-producing space – was renewed or leased in the nine months ended Dec 31, resulting in a higher average portfolio rental. The real estate investment trust (Reit) aims to renew or replace expiring leases in advance, it said.
‘Looking forward, less than 6 per cent of space is due for renewal in the current financial year, and less than 13 per cent in the next year,’ a-iTrust said. ‘The leases, with locked-in terms and expiries stretching beyond 2014, will also enable the trust to enjoy income stability.’
Barring unforeseen circumstances, a-iTrust is confident of meeting the FY 2008/09 DPU forecast of 6.85 cents stated in its 2007 listing prospectus.
The trust’s shares closed unchanged at 50 cents yesterday.
PLife – CIMB
Staying defensive
• In line. 4Q08 DPU of 1.84cts and FY08 DPU of 6.83cts were in line with Street and our expectations. Full-year gross revenue of S$53.9m was up 218.9% yoy (only four months of contribution in 2007 because of listing in August). Qoq growth was strong in 4Q08 at 21.2% on full contributions from portfolio assets and higher minimum rents from Singapore hospitals. This minimum had been fixed at 6.25% based on the CPI + 1%, effective from 23 Aug 08 to 22 Aug 09. Foreign-exchange loss from an appreciating yen (related to its Japanese assets) in 4Q08 was significant at almost S$8m, although this did not affect distribution. As at 31 Dec 08, portfolio value was S$1.048bn, down S$3.3m because of acquisition costs. Asset leverage remained low at 23.3%.
• New CEO and CFO appointed; capital management remains prudent. Acting CEO and CFO Mr Yong Yean Chau has been confirmed as the new CEO. Vice President of Corporate Finance, Mr Loo Hock Leong, will take over as CFO. Both appointments take immediate effect. With the ex-CFO at the helm, we expect PLife to take a more conservative stance. PLife’s current capital management is positive: 1) 100% of its debt is now long-term debt with a weighted average tenure of 2.8 years; 2) PLife has no refinancing risks until 2011; 3) interest cost has been fixed at 2.85% for 100% of its debt for three years; and 4) foreign-sourced income has been hedged for five years. Acquisitions in 2009, if any, are likely to be opportunistic and funded by debt. PLife has S$210m of unutilised revolving credit facilities and a S$500m medium-term note programme established last August.
• Maintain Outperform with lower target price of S$1.20 (from S$1.30). The outlook for organic growth is positive as the CPI-pegged base-case rents are set to grow by 6.25% in the first eight months of FY09. We refine our revenue projections based on actual FY08 income and lower our CPI assumption (for Sep 09 onwards) to 0% from 2%. Our DPU estimates for FY09-10 decrease by 6-8%. We also introduce FY11 forecasts. Our target price has been lowered to S$1.20 (from S$1.30). At 0.56x P/BV, PLife is cheaper and has less rental downside and refinancing risks than the other “premium” REITs, A-REIT (0.78x) and CMT (0.64x).
FrasersCT – DMG
Flat Is The New Up
Modest 1Q09 performance. Frasers Centrepoint Trust (FCT) recorded a 3.7% YoY improvement (-18.3% QoQ) in 1Q09 DPU to 1.67¢, which accounted for 24% of our FY09 estimates (in line) and 22% of the Street’s (slightly below). Operating-wise, topline inched lower by 3.2% YoY (-11.8% QoQ) to S$19.5m, attributable to ongoing AEIs at Northpoint. NPI was down by a wider margin (- 8.0% YoY, -9.0% QoQ) to S$12.8m, due to higher property taxes and other property operating expenses.
Flat (reversions) is the new up. With 90% of FY09 gross rental income already locked in, we reckon earnings should be rather stable for the remaining three quarters of FY09. Any possible growth in FY10 DPU should herald from a full year contribution from the post-AEI Northpoint (annual incremental NPI of S$4.1m, completion in end-Jun 09). Occupancy rate should also then revert to > 90% (88.7% currently), from our view. For FY09F and FY10F, we have tweaked our occupancy levels to 95% (96% previously). Flat (-1% to 2% previously) rental reversion rates have been assumed for the 16.6% and 12.1% in NLA which are up for renewal in FY09 and FY10 respectively. FY09F and FY10F DPU thus slip by 1.5 – 1.8% to 6.9¢ and 7.1¢ respectively.
Maintain BUY at lower fair value of S$0.82. As FCT enters the third major economic downcycle, we cannot stress enough the unfailing resilience of Causeway Point and Northpoint (90 – 95% of topline and NPI), as exhibited by their > 95% occupancy and minimal loss of rental income during the previous two crises. This is not unjustifiable given that their suburban malls target mainly the consumers who shop for non-discretionary items regardless of the general economic performance. Further, we believe supply-side competitive pressures from upcoming malls are insignificant, as there is still a paucity of new malls within the close vicinity of FCT’s properties, aside from the surrounding small mom and pop neighbourhood shops. We also welcome FCT’s move to pass on the 40% property tax rebates within the recent Budget 09 to tenants. At 28.5%, FCT remains one of the lower-geared S-REITs, with its next major loan only due in 2H11. At current levels, the stock is trading at FY09F – FY10F yields of ~ 10%. Maintain BUY at lower fair value of S$0.82 (S$0.86 previously). Key risks include more macroeconomic dampeners and prolonged credit crunch.