The REIT sector remains in the doldrums as persistent worries linger over the impact of Trump’s widespread tariffs.
However, there is a bright spark among the REITs as CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT, posted an admirable 11.3% year-to-date (YTD) share price gain.
This performance ranks as one of the best among the Singapore REITs (S-REITs) and is ahead of many other blue-chip REITs.
Mapletree Logistics Trust (SGX: M44U) posted a YTD performance of just 3.9%, while Frasers Centrepoint Trust (SGX: J69U) did slightly better with a 4.3% YTD gain.
What’s driving these gains, and can CICT continue to grow its distributions into the future?
A stellar track record
CICT boasts a solid track record of distribution per unit (DPU) growth over the years.
The retail and commercial REIT was one of a handful of REITs that reported a year-on-year DPU increase for 2024 despite the presence of elevated interest rates.
2024 saw DPU inch up 1.2% year on year to S$0.1088 on the back of a 1.7% year-on-year increase in gross revenue to S$1.59 billion.
Good expense control saw net property income (NPI) rise 3.4% year on year, double the rate of increase in CICT’s gross revenue.
Other than 2024, CICT also posted higher DPU since 2021 when the REIT saw a sharp rebound from the COVID-19 movement restriction measures imposed in the wake of the pandemic.
2021 saw a sharp 19.7% year-on-year jump in DPU from S$0.0869 to S$0.104.
2022 saw a further increase in CICT’s DPU to S$0.1058 and 2023’s DPU increased once again to S$0.1075.
These consistent increases show that CICT’s manager is adept at controlling costs and can execute measures to continue to grow its rental income.
Consistently-solid operating metrics
One clear method of determining if a REIT’s portfolio is in demand is to look at operating metrics such as occupancy rates, rental reversions, and shopper traffic.
These metrics provide a window into the demand for the REIT’s assets and give a clear signal as to whether tenants wish to take up spaces within these properties.
For CICT, its portfolio occupancy has consistently been above 93%, a sign that its properties are well-tenanted with low vacancies.
2021’s occupancy stood at 93.9%, and 2022 and 2023 saw further improvements to the occupancy rate at 95.8% and 97.3%, respectively.
For 2024, portfolio committed occupancy dipped to 96.7% but was still above 95%, a testament to the strong leasing demand for its portfolio of properties.
CICT’s portfolio rental reversion also offers a good look at the demand for its properties.
While 2021 saw negative rental reversion largely because of the after-effects of the pandemic, 2022 posted a 1.2% positive reversion for CICT’s retail portfolio and 7.6% for its office portfolio.
2023 reversion was even stronger – 8.5% for the retail segment and 9% for the office segment.
2024 topped 2023’s performance with an 8.8% rental reversion for retail and an 11.1% reversion for the office division, signalling continued strength of demand for CICT’s portfolio.
For the last three years (2022 to 2024), CICT’s retail division also saw year-on-year increases in both shopper traffic and tenant sales, attesting to the continued popularity of the REIT’s malls.
Acquisitions and AEIs
Apart from positive rental reversions, CICT’s manager has been active in acquisitions and capital recycling.
These measures help to rejuvenate the portfolio and add to CICT’s asset base while improving DPU.
Asset enhancement initiatives (AEIs) are another method employed by the manager to increase rental income organically.
Since 2022, CICT has embarked on several notable acquisitions such as purchasing a 70% interest in 79 Robinson Road (renamed CapitaSky) and a 50% interest in ION Orchard Mall.
Along the way, CICT also divested its interest in 21 Collyer Quay for S$681.7 million at an exit NPI yield of 3.5%.
These acquisitions helped to boost DPU while the divestment allowed the REIT to lower its gearing.
Some AEIs completed during these three years include the rejuvenation of Raffles City Mall and the upgrading of CQ @ Clarke Quay.
The manager has two AEIs in progress – IMM Building and Gallileo (in Germany) that should be completed by this year.
Get Smart: High chance of growing DPU further
With CICT’s stellar operating metrics and its track record of growing its DPU, there is a high chance the REIT can continue to do so for 2025.
The manager’s astute debt management, along with its capital recycling programme and AEIs, should help to boost organic rental income and lead to higher gross revenue and NPI over time.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
