UPDATE: CapitaLand Commercial Trust reported 3Q19 net property income rose 1 percent, beating Daiwa forecast

CapitaLand Commercial Trust Gallileo building in Singapore. Credit: CapitaLand Commercial Trust; used with permission.CapitaLand Commercial Trust Gallileo building in Singapore. Credit: CapitaLand Commercial Trust; used with permission.

This article was originally published on Wednesday, 23 October 2019 at 8:27 A.M. SGT; it has since been updated with more details.

CapitaLand Commercial Trust reported Wednesday its third quarter net property income increased 0.9 percent on-year to S$81.14 million on the acquisition of Gallileo and Main Airport Center.

The results beat a forecast from Daiwa.

Gross revenue for the quarter ended 30 September increased 3.3 percent on-year to S$103.80 million, the REIT said in a filing to SGX.

The distribution per unit (DPU) came in at 2.20 Singapore cents, unchanged on-year, the filing said.

Daiwa had forecast net property income of S$79.8 million on gross revenue of S$99.5 million, with a DPU of 2.19 Singapore cents.

The trust also said it saw higher revenue from the 21 Collyer Quay, Asia Square Tower 2 and Capital Tower properties, and received a one-off compensation sum of S$2.1 million from a tenant at Asia Square Tower 2 for early surrender of a lease. The higher revenue was offset by the
divestment of Twenty Anson and lower revenue from Six Battery Road and Bugis Village, the trust said.

CapitaLand Commercial Trust also completed the acquisition of Main Airport Center in Germany, with contributions for the 18 September to 30 September period, the filing said. The Gallileo property began contributions in June 2018, the filing said.

“Higher DPU was achieved due to improved net property income performance, more distributions from subsidiaries and associates, and lower interest expense,” the filing said.

Portfolio occupancy remained high at 97.6 percent as of end-September on proactive moves to negotiate lease renewals ahead of expiries, the REIT said.

During the quarter, the REIT signed around 480,000 square feet of new and renewal leases, with 57 percent of them new, the filing said.

“Aside from coworking, new demand came mainly from companies in the business consultancy, IT, media and telecommunications, banking, and financial services sectors. The majority of the leases committed in the third quarter of 2019 continue to be signed at rents higher than the respective expiring rents,” Capitaland Commercial Trust said.

It added it only has 4 percent of leases by committed office net lettable area expiring this year, more than half of them are in advanced negotiations.

For the nine-month period, CapitaLand Commercial Trust reported net property income of S$239.33 million, up 1.7 percent on-year, on gross revenue of S$304.55 million, up 3.3 percent on-year. The nine-month DPU was 6.60 Singapore cents, up 1.9 percent from 6.48 Singapore cents in the year ago period, the REIT said.

At the end of the quarter, the REIT’s portfolio had 10 assets, with eight in Singapore and two in Frankfurt, Germany.

In its outlook, CapitaLand Commercial Trust pointed to CBRE data showing Singapore’s average monthly Grade A office market rent has increased 6.0 percent on-year through 30 September to S$11.45 a square foot, with occupancy in the city-state’s core central business district office buildings at 96 percent at end-September, up from 95.8 percent at end-June.

In Frankfurt, the office market is expected to remain resilient amid falling vacancy rates, the trust said.

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