TCT sees at least 25% rise in net property income

TREASURY China Trust (TCT) is expecting at least a 25 per cent jump in net property income this year, thanks to its recent acquisition of two shopping malls in Shanghai and Qingdao. It is now looking to acquire retail malls in Xi'an through its tie-up with Hong Kong retail group Ginwa Investment this year.

'We are seeing about 25 per cent increase in net property income as a result of those two acquisitions,' TCT chief executive Richard David told BT yesterday. 'On every front, we expect 2011 to be very strong,' he said, pointing to TCT's existing development pipeline which is fully funded, continued strong economic underpinnings in China and income accretion from the two latest acquisitions.

TCT's current portfolio comprises completed office/ retail properties Central Plaza, City Centre and Treasury Building in Shanghai. It is building 74,000 sq m space in Beijing International Logistics Park and adding 88,000 sq m in City Centre, where it expects strong pre-leasing commitments this year. Its recent stake acquisitions in two retail malls in Qingdao and Shanghai, to be completed by April, will add a further 225,000 sq m of retail space to TCT's portfolio and double TCT's development pipeline to more than 330,000 sq m.

The enlarged portfolio is estimated to yield net property income of 302.3 million yuan (S$58.5 million) for fiscal 2011, up from 238.6 million in fiscal 2010, a 26.7 per cent increase.

TCT yesterday posted a net profit of $20.9 million for the fourth quarter ended Dec 31, 2010, 8.5 times its forecast, and a net profit of $39.6 million for the full year, 16 times its forecast, on the back of a $33 million fair-value gain in investment properties. Net property income for the fourth quarter was $12 million, 5.8 per cent lower than forecast, while that for the full year was $22.6 million, 4.1 per cent below forecast. TCT has declared a distribution per unit of 2.5 cents for the fourth quarter, representing annualised yield of 5.7 per cent.

There are no comparative figures from a year ago as TCT was listed only last June by way of introduction, after taking over China Real Estate Opportunities (CREO) that was formerly listed on London's Alternative Investment Market. Mr David said TCT is looking at a number of retail properties in Xi'an with its partner Ginwa, where TCT will take up majority ownership of 55 per cent. TCT had in December agreed to acquire a 55 per cent stake in Sanyang Property Development Co Ltd, which owns Central Avenue Retail Mall in Qingdao, at 476.85 million yuan – its first investment made in partnership with property developer TRIO Group. It also agreed to acquire 100 per cent of a firm which owns the Huai Hai Mall (formerly referred to as Retail Mall) in Shanghai at 575 million yuan.

These two acquisitions will raise TCT's retail exposure from 28 per cent of its total portfolio's gross floor area to 56 per cent. Mr David said TCT will continue to expand its retail exposure, given the segment's growth potential supported by strong double-digit retail sales growth in China.

'We would also expect the strategic partnership agreement with the TRIO Group, having already identified one acquisition in Qingdao, to also identify more in the years to come,' Mr David said. TCT has zero debt maturing by end-2012 and a cash hoard of $104 million as at Dec 31.