A flurry of REITs has been reporting its latest earnings in the past two weeks.
It’s heartening to note that many of them are reporting higher distribution per unit (DPU) along with a high occupancy rate.
CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT, is one of them.
The retail cum commercial REIT is enjoying a better performance from Singapore’s reopening and through its portfolio enhancement efforts.
Income investors will be pleased to note that the REIT has not only raised its DPU for its fiscal 2022’s first half (1H2022) but has announced plans to further optimise its property portfolio.
Here are five facts that investors should know about this blue-chip REIT.
1. A better performance from all asset classes
For 1H2022, CICT’s gross revenue rose 6.5% year on year to S$687.6 million while net property income (NPI) increased by 6.2% year on year to S$501.6 million.
All three of the REIT’s asset sub-classes performed well, chalking up increases in gross revenue and NPI.
Retail assets saw revenue rising 3.1% year on year to S$276 million while NPI improved to S$197 million from S$188.6 million in 1H2021.
Meanwhile, CICT’s office assets enjoyed an 11.9% year on year rise in revenue to S$214.9 million.
NPI for this sector rose 10.8% year on year to S$163 million.
As for integrated developments, gross revenue inched up 5.7% year on year to S$196.6 million while NPI edged up 3.7% year on year to S$141.6 million.
CICT declared a DPU of S$0.0522 for 1H2022, slightly higher than the S$0.00518 paid out in 1H2021.
Trailing 12-month DPU stood at S$0.1044, giving the REIT’s units a trailing distribution yield of 4.7%.
2. Healthy operating metrics
Operating metrics remained healthy for CICT, with portfolio overall committed occupancy staying high at 93.8% as of 30 June 2022.
For its retail portfolio, occupancy stood at 96.5% with a very high tenant retention rate of 89.1% based on net lettable area.
Meanwhile, for 1H’2022, both shopper traffic and tenant sales saw improvements year on year, with the former rising by 12.5% and the latter increasing by 15.9%.
However, rent reversion was slightly negative, down 0.5% for incoming average rents versus outgoing rents.
Elsewhere, CICT’s office portfolio occupancy was 91.9% across its Singapore, Australian, and Germany office assets.
For Singapore, office committed occupancy was slightly higher at 92.9% while tenant retention rate stood at 91.4%.
Moreover, the good news is rental rates saw a positive reversion of 8.5%, with the average office rental rate at S$10.53 per square foot.
3. Majority of its loans are hedged
CICT’s aggregate leverage was fairly high at 40.6%, up from 39.1% in the previous quarter.
However, 81% of its borrowings are on fixed rates, thus protecting the REIT against a sharp rise in interest rates.
The interest coverage ratio remained healthy at 4.1 times with a low average cost of debt of 2.4%.
The REIT has also provided some guidance on the impact of interest rates; a 1% rise in interest rates is estimated to lower DPU by around S$0.0028.
4. A diversified tenant base
The REIT enjoys a diversified tenant base, with no single tenant contributing more than 5% of CICT’s total gross rental income (GRI).
The top 10 tenants contribute close to one-fifth of the total GRI and include reputable names such as Temasek Holdings, Cold Storage Singapore, a unit of DFI Retail Group (SGX: D01), and Breadtalk Group Limited.
The portfolio also has a mix of different industries, with banking, insurance and financial services taking up 19.3% of GRI for June 2022.
Food and beverage, a sector resilient to economic downturns, takes up 18.4% of GRI.
5. Asset enhancement initiatives
CICT is embarking on asset enhancement initiatives (AEI) to optimise its portfolio and drive rental income growth.
For Raffles City Singapore, a new lineup of international brands such as Givenchy, Chanel, Dior (EPA: CDI), and Gucci, are set to open their stores progressively from 3Q2022 to 1Q2023.
This expanded line-up of famous brands will reinforce the mall’s premium position, thus attracting more well-heeled shoppers that will increase both footfall and tenant sales.
Elsewhere, an upcoming AEI for CQ @ Clarke Quay costing S$62 million will extend its appeal from being just a nightlife attraction to one that attracts shoppers throughout the day.
Incoming tenants include spa and massage chain Natureland, Chinese restaurant Seafood Paradise, and music store Swee Lee.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
