Category: CMT
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.
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.
CMT / CCT – BT
CapitaMall Trust and CCT issue US$645m secured notes
CapitaRetail China Trust raises gross proceeds of $70m from placement
CAPITACOMMERCIAL Trust (CCT) and CapitaMall Trust (CMT) yesterday announced the issue, through Silver Oak, of US$645 million five-year secured floating rate notes (FRNs).
Separately, CapitaRetail China Trust (CRCT) – another trust in the CapitaLand stable – announced a successful private placement.
The FRNs issued by Silver Oak are secured by Raffles City Singapore, a mixed-use property jointly owned by CCT (60 per cent) and CMT (40 per cent), through special-purpose trust vehicle RCS Trust.
Silver Oak is a special-purpose company incorporated to provide credit facilities to RCS Trust.
Half of the notes have been placed with Asian institutional investors and the other half with European investors. The issue was 1.7 times subscribed.
Proceeds from the notes – which have been assigned an AAAsf rating by Fitch Inc and a Moody’s Investors Service rating of Aaa(sf) – have been swapped into S$800 million.
In addition, Silver Oak has drawn down S$164 million from a S$200 million five-year term-loan facility granted by DBS Bank, HSBC and Standard Chartered Bank.
‘The S$800 million proceeds from the FRN, together with the amount of S$164 million term loan, are on-lent to RCS Trust to refinance RCS Trust’s existing aggregate debt of S$964 million, ahead of the latter’s expected maturity date on 13 September 2011,’ said the managers of CCT and CMT.
‘The balance S$36.0 million of the term loan is expected to be fully drawn down in September 2011 to finance purposes such as asset enhancement initiatives and working capital.’
The interest rates payable by RCS Trust for the S$800 million proceeds and the S$200 million term loan will be fixed at 3.09 per cent per annum and 3.025 per cent per annum respectively, from Sept 13.
CapitaCommercial Trust Management Limited chief executive officer Lynette Leong noted that this ‘marks the completion of the early refinancing of CCT’s only outstanding debt for 2011 and extension of its portfolio debt maturity’.
The three banks have further granted a five-year committed revolving credit facility of S$300 million, available to finance future capital expenditure, asset enhancement initiatives, and general corporate and working capital purposes.
Meanwhile, CRCT announced yesterday that its initial private placement size of S$55 million was 2.5 times subscribed. As a result, the full upsize option was exercised, raising gross proceeds of about S$70 million through the placement of 59.8 million new units.
Said Victor Liew, chairman of CapitaRetail China Trust Management Limited (CRCTML): ‘The strong demand by investors for the private placement is testament to the attractiveness of CRCT as an investment for unitholders to tap into China’s consumption growth.’
Each new unit was issued at $1.17, representing a discount of approximately 3.2 per cent to CRCT’s adjusted volume weighted average price.
The total demand book comprised over 40 existing and new investors from Asia, the United States and Europe.
CapitaMalls Asia’s (CMA’s) subsidiaries subscribed for about 12.9 million new units.
Gross proceeds from the private placement will be used to finance the acquisition of New Minzhong Leyuan Mall, with the remaining balance funded by a drawdown from CRCT’s existing debt facilities.
CRCTML also intends to declare an advance distribution for existing unitholders, for the period from Jan 1 to June 29, at an estimate of between 4.26 cents and 4.30 cents per unit.
The books’ closure date for the advance distribution is June 29 at 5pm. The advance distribution will be paid around Sept 23 this year.
In the stock market yesterday, CCT shares closed two cents lower at $1.43, CMT shares closed one cent lower at $1.90, and CRCT shares closed three cents lower at $1.22.
CMT, CCT – BT
CapitaCommercial, CMT plan issue of floating rate notes
CAPITACOMMERCIAL Trust (CCT) and CapitaMall Trust (CMT) intend to launch a ‘benchmark-size’ offering of US dollar secured floating rate notes this month, the trusts said yesterday.
The notes, which will be due in 2018, are part of the $10 billion multi-currency secured medium term note programme set up in September 2006.
CCT and CMT – which are both units of Singapore’s largest listed property group CapitaLand – did not provide the total value of the notes that will be issued in this tranche. But benchmark-size offerings are usually in excess of US$500 million.
Some $866 million worth of notes have been issued to-date under the programme, a spokesman said. He added that a further announcement will be made when the notes are launched, which is expected to be within this month. The notes, which will be secured by Raffles City Singapore, will be issued through special purpose vehicle Silver Oak.
CCT and CMT also said that in conjunction with the notes issue, DBS Bank, The Hongkong and Shanghai Banking Corporation (HSBC) and Standard Chartered Bank will grant a $200 million term loan facility and a $300 million revolving credit facility to the issuer. It is intended that the facilities will mature on the same date as the notes and will also be secured by Raffles City Singapore – but will be subordinated to the notes.
DBS, HSBC and Stanchart has also been appointed as the joint lead managers of the notes issue. The proceeds from the notes and facilities will be used to refinance existing borrowings, finance future capital expenditure and asset enhancement initiatives, and for general corporate and working capital purposes.
The notes are expected to be assigned an ‘AAA’ rating by Fitch and an ‘Aaa’ rating by Moody’s Investors Service, CCT and CMT said.
CCT shares gained one cent to close at $1.46 yesterday, while CMT closed unchanged at $1.95.
CMT – OCBC
Acquisition of the Jurong Gateway site
$S969m tender award. CapitaMall Trust (CMT) has been successfully awarded the Jurong Gateway site, located at Boon Lay Way by URA on 30 May at a tender price of S$969m (S$1,1012 psf ppr). This was a joint tender by CMT, CMA and CapitaLand, of which CMT has a 30% stake in the JV. The total development cost is expected to be about S$1.5b (S$1,566 psf ppr).The land parcel has a prime location next to both Jurong East MRT station and Jurong East bus interchange. Jurong is slated to be the largest regional centre in Singapore for commercial developments outside the city centre (under URA’s Jurong Lake District Masterplan). Jurong Gateway is about 2.5 times the size of Tampines Regional Centre.
“3-in-1” Mega Mall in Jurong. CMT will be building a 25- storey retail-cum-office property at the new site, adjacent to another upcoming Lend Lease office/retail building, scheduled for completion in 2014. With two other CMT malls in the vicinity (IMM and JCube), CMT’s selling proposition is to create a “3-in-1” mega mall in Jurong, offering 1m sqft of retail NLA within three minutes’ drive from each other in Singapore’s soon-tobe largest regional hub. CMT intends to finance the development by internal funds and debt.
Downgrade to HOLD on valuation grounds. We have factored in contributions from both the retail mall and office building into our valuation, commencing on Dec 2013 and Jun 2014 respectively. Our total development costs for CMT works out to about S$469m, which accounts for 5.8% of CMT’s total assets as of 31 Mar (within the property fund guideline of 10% development cap). CMT has guided that it is targeting rentals of S$16-S$18 psf pm and S$7-S$8 psf pm for the retail and office segments respectively, with an initial yield-on-cost of 6%. According to our model, these targets are fairly tight and require somewhat vigorous occupancy rates in the first year to attain the desired 6% yield. In addition, unlike the Tampines Regional Centre, which is hailed as the “financial hub in the east”, the Jurong precinct does not have a strong financial institution catchment base. We therefore remain wary of (1) the office take-up in that area, with the nearby International Business Park, JTC summit and iHub buildings offering cheaper alternatives and (2) “retail tenants’ fatigue” among the four malls within a 500m radius from the MRT station. Moreover, CMT’s share price has appreciated 6.5% since our last report dated 21 Apr. Downgrade to HOLD on valuation grounds with an increased fair value of S$2.05 (prev: S$2.02). We will turn buyers at S$1.93.