Shopping malls have been given a new lease of life.
Since April 26, SafeEntry barriers have been removed at malls across the island as Singapore continued easing COVID-19 measures.
Shoppers no longer have to whip out their TraceTogether tokens or apps to enter malls and restaurants.
With group size limits removed and self-serve buffets also back on the cards, a sense of normalcy is beginning to take hold.
And with that, unitholders of retail cum commercial REITs such as CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT, can finally look forward to a stronger recovery in shopper traffic.
We took a look at four important points from the REIT’s latest business update for the first quarter of 2022 (1Q2022) to gain insights into the REIT’s prospects.
Stable financial and portfolio performance
CICT delivered a solid, if unspectacular, financial performance for 1Q2022.
The REIT reported gross revenue of S$339.7 million for the quarter, 1.5% higher year on year.
Net property income (NPI) inched up by 0.5% year on year to reach S$248.3 million, impacted by a rise in utilities expense.
On the property portfolio front, committed occupancy dipped slightly from 93.9% as of 31 December 2021 to 93.6% on 31 March 2022.
Although retail occupancy remained high at 96.6%, shopper traffic fell by 5.3% year on year.
But despite the decrease in footfall, sales per square feet improved by 0.6% compared to 1Q2021, with sales in downtown malls increasing 1.9% while suburban mall sales fell 0.8%.
CICT’s retail segment also had to endure negative rental reversions of 1.3%.
However, excluding the retail component of Raffles City, which is undergoing a rejuvenation of the tenant mix, CICT’s would have posted positive rental reversion of 1.2%.
Going to CICT’s office properties, overall occupancy remained stable at 91.4%, and the REIT enjoyed positive rental reversions of 9.3%.
Overall, CICT’s weighted average lease expiry (WALE) stood at a healthy 3.7 years as of 31 March 2022.
Portfolio updates
To create further value for unitholders, CICT has been busy with its portfolio reconstitution.
In March 2022, the REIT completed its divestment of shopping mall JCube, with the aim of reinvesting the proceeds into other investment opportunities.
CICT also made its first foray into Australia.
It acquired 66 Goulburn Street and 100 Arthur Street, office properties in the city of Sydney.
Both acquisitions are expected to be DPU-accretive, raising the REIT’s 1H2021 DPU by 3.1% to S$0.1054 on a pro forma and annualised basis.
Domestically, CICT has also acquired a 70% interest in CapitaSky, formerly known as 79 Robinson Road.
The Grade A office building has a long WALE of 5.8 years, and would have increased CICT’s FY2021 DPU by 2.9% to S$0.1056 on a pro forma basis.
Retail and office outlook
Investors should feel optimistic about CICT’s prospects with the removal of more COVID-19 restrictions.
For example, the lifting of group size limits should encourage more large group gatherings, and activities and events are also now permitted to resume at mall atriums.
Such activities will provide a boost to footfall as malls welcome more shoppers.
In addition, the reopening of borders should attract more tourists to Singapore, which would be good news to the downtown malls.
For offices, research firm CBRE is bullish on the outlook for 2022.
It expects office rents for the Grade A CBD Core market to grow 6.9% year on year in 2022, fuelled by demand for flexible working spaces, technology and non-banking financial services, along with limited supply of office spaces in the area.
New initiatives
CICT is also pursuing various initiatives to enhance its portfolio.
For example, it is embedding sustainability into its business strategy and operations, with Tampines Mall and CapitaGreen being fitted with technology to reduce energy consumption.
The REIT has also secured S$350 million in sustainability-linked loans and issued a S$155.2 million green bond in 1Q22.
These moves have contributed to the REIT being included in the newly-listed Lion-OCBC Securities Singapore Low Carbon ETF (SGX: ESG).
CICT has also improved the offerings in its retail malls.
Apart from new curated retail experiences such as introducing a LEGO certified store at Funan and a SOAMI flagship jewellery store at Raffles City, it has launched atrium activities such as a car roadshow and food fair to engage shoppers.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
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Disclosure: Herman Ng owns shares of CapitaLand Integrated Commercial Trust.
