Cambridge – BT
Cambridge Ind’l Trust reports 4% fall in DPU
It hopes to deliver stable DPU this year with its long average lease expiry
CAMBRIDGE Industrial Trust (CIT) has announced a distribution of 1.373 cents per unit for the quarter ended Dec 31, 2008, said Reit manager Cambridge Industrial Trust Management Ltd (CITM).
The Q42008 DPU is 0.117 cent lower than the same period a year ago.
CIT’s total net distributable income for FY2008 was $47.9 million with an annual DPU of 6.012 cents. This represents an annual yield of 21.9 per cent based on the closing price of $0.275 per unit on Dec 31, 2008, said CITM.
The annual DPU for FY2008 of 6.012 cents was a decrease of 4.0 per cent from 6.262 cents in FY2007.
Said Chris Calvert, chief executive officer of CITM: ‘We are pleased to report a set of consistent results for FY2008 in this difficult economic environment.’
All its properties are signed with long leases of up to 15 years, with fixed rental escalation. The weighted average remaining lease term of CIT’s existing portfolio of 43 properties remained stable at 5.7 years as at December 2008, CIT said.
As at the end of 2008, CIT has a portfolio of 43 properties with 653,673.39 square metres of lettable area valued at $995.4 million. The weighted average land lease on these properties is 39.4 years, excluding freehold property which comprises 5.4 per cent of total lettable area. About 35 per cent of the portfolio of properties is in the logistics and warehousing sector, with the next significant segment in the light industrial space accounting for 34 per cent.
The occupancy of CIT’s portfolio was 99.5 per cent.
‘CIT continues to place prudent capital management at the centre of its business strategy as evidenced by recent signing of term sheets with three banks under which they will commit to provide a $390 million syndicated term loan,’ it said. The group’s gearing was 37.8 per cent, below its long-term leverage target of 40 per cent.
CIT said its future outlook will be determined by the severity of the impact of the current financial crisis. ‘However, for this financial year, CIT believes itself to be well-positioned to deliver stable DPU, with its relatively long average lease expiry of 5.7 years on top of a high 16-month security deposit,’ it added.
CDLHTrust – CIMB
Bracing for a rough ride
• Weak 4Q08 results but FY08 in line. 4Q08 results were weak, with DPU of 1.8cts forming only 16% of our full-year estimate. However, due to strong performances in the earlier three quarters, full-year DPU of 10.62cts was in line with Street and our expectations, at 95% of our estimate. Full-year gross revenue of S$114.7m was up 26.5% yoy on strong average room rate (ARR) growth of 23.9% to S$244. Compared with 4Q07, portfolio occupancy in 4Q08 declined 4.9% pts to 83.7% although ARR still grew by a modest 3.7% to S$224. REVPAR in 4Q08 was S$188, down 1.6% from 4Q07.
• Increased property expenses and tax adjustments hit NPI. 4Q08 net property income (NPI) of S$21.7m was down 19.4% yoy due to: 1) a one-off S$3.2m additional property tax with respect to 2006 and 2007, based on revised assessments by IRAS in Dec 08; 2) an increase in the computation of the annual value of hotels to 20% of gross room receipts (previously 15%) from 1 Jan 08; and 3) S$1.3m paid to the MCST of the Liang Court complex for replacement and refurbishment works.
• Reducing payout to 90%; tightening expenses. Going forward, management‘s focus would be on: 1) maximising revenue by concentrating on non-transient hotel stayers such as airline crew and increasing weekend stays; 2) cost containment through increasing staff productivity; and 3) capitalising on economies of scale through the M&C group. Management will be distributing 90% of its taxable income for 1 Jul-30 Dec 08, instead of 100%. Although this would attract an 18% corporate tax on the S$4m retained, management defended its decision on the basis of an increase in financial flexibility and discipline in capital management. The 10% retention of distributable income reduces paid-out DPU by 4.5%.
• Maintain Underperform; lower target price of S$0.68 (from S$0.77). We reduce our payout assumptions from 100% to 90% and our DPU estimates for FY09-10 have been lowered by 10% accordingly. We also introduce FY11 forecasts. At 0.46x P/BV, CDLHT is more expensive than its hospitality peer, ART (0.38x). In view of continuing slowing visitor arrivals, catalysts appear lacking for 1H09. Maintain Underperform.
PLife – DBS
4Q08 results in line
4Q DPU was 1.84 cents, bringing the year’s DPU to 6.83cents, which is within expectations. PREIT remains a defensive play as gross rentals are protected by the 1%+CPI formula. We revised TP down marginally to $1.11 on lower CPI growth assumption of 0% for 2009 versus 2.8% previously. Dividend yield of 9% is attractive with no immediate refinancing till c.2011.
4Q08 DPU 1.84 cents. FY08 gross revenue ended at S$53.9m due to higher rents from Singapore hospitals and contribution from its Japanese properties (S$5.2m). 4Q DPU was 1.84cents, bringing FY08’s total to 6.83cents. Fair value of properties dipped 0.3%, largely from writing down of capitalized acquisition costs from Japan properties. Valuation of Singapore properties remained stable at $832m on higher valuation of Gleneagles Hospital and Eastshore Hospital, offset by Mount Elizabeth Hospital.
No refinancing risks. PREIT average debt tenor is 2.8 years and they do not have refinancing risks in the next 24 months. Gearing stands at 23.3% with debt headroom of $300m before it reaches a gearing of 40%. Rental downside protected by “CPI formula”. Singapore hospitals revenue is protected by the minimum guaranteed rent, which will grow by at least 1%+CPI. In the event that CPI is negative, rental will still grow by at least 1%.
Maintain Buy, TP: S$1.11. We adjust our DPU and TP down slightly as we take into account lower CPI rate in 2009 and higher interest expense on a larger debt (than previously estimated). We have assumed 0% CPI rate in 2009, in line with DBS economists’ estimate. We like this counter for its prospective dividend yield of over 9%, with downside rental protection and limited refinancing risks till c.2011. Maintain Buy.
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.