Previously known as CapitaLand Mall Trust, CapitaLand Integrated Commercial Trust (SGX:C38U), or CICT for short, was formed as a result of the merger between CapitaLand Mall Trust and CapitaLand Commercial Trust in November 2020.
Post-merger, the REIT’s portfolio consisted of a total of 22 properties in Singapore (11 retail properties, 6 office properties, and 5 integrated development), and 2 in Frankfurt, Germany.
Last Friday (19 March 2021), the blue-chip REIT released its annual report for the financial year 2020 ended 31 December 2020, along with its notice of annual general meeting (AGM.)
In today’s post, you will find a key summary of the report (which I have compiled for those who do not have time to go through it), details about its upcoming AGM (and how you can sign up), along with questions I have submitted (as a unitholder) to the REIT’s management.
Let’s get started…
Message to Unitholders (by CEO Mr Tony Tan Tee Hieong, and Chairperson Ms Teo Swee Lian)
Formation of CICT:
- Key highlight for the financial year 2020 was the merger with CapitaLand Commercial Trust to become Singapore’s largest REIT, as well as one of the largest REIT in Asia-Pacific based on their market capitalisation of S$14.0b as at 31 December 2020.
- Post-merger, the enlarged CICT is better-positioned to leverage on the real estate trends and opportunities in retail, office, and integrated development, and at the same time offering the flexibility for the REIT to acquire assets overseas of up to 20% of their total portfolio property value of S$22.3b.
- Apart from actively managing the combined portfolio of properties, the REIT is also working on ensuring a smooth execution of the ongoing Asset Enhancement Initiative (AEI), as well as the leasing and completion of CapitaSpring (committed occupancy was 38%, with another 22% under advanced negotiation; the project is on track to complete by 2H 2021.)
- At the same time, work is current in progress to review and evaluate their existing properties for other enhancement opportunities, or for potential divestment to recycle capital.
Provision of Support to Tenants Affected by the Covid-19 Pandemic:
- Besides passing on the Singapore government’s cash grants and rebates, as well as providing financial support to qualifying tenants (whose businesses were affected by the two-month circuit breaker imposed by the Singapore government in a bid to stop the further spread of the pandemic in the community), the REIT also proactively extended support beyond the requirements to other tenants that were adversely affected by the pandemic, but did not qualify under the Covid-19 legislative bill.
- An aggregate rental relief of S$128.4m in total was granted to tenants in FY2020.
Key Performance Statistics:
- Gross revenue was down by 5.3% on a year-on-year (y-o-y) basis to S$745.2m, while its net property income declining by 8.1% to S$512.7m – due to a lower gross rental income arising from rental waivers granted by the landlord to tenants, along with lower occupancy and rental rates contracted on new and renewed leases.
- Gearing ratio is 40.6% post-merger (which is still within a manageable range in the short-term), and the average cost of debt at 2.8%, with 83% of the REIT’s total borrowings on fixed rates.
- Overall portfolio occupancy rate is 96.4%, with its top 10 tenants contributing 21.1% towards the REIT’s monthly rental income. Its portfolio weighted average lease expiry (WALE) is 3.0 years by gross monthly income, with about 16.3% of retail leases and 8.5% of office leases expiring in the year 2021 ahead. The REIT is targeting portfolio stability by signing on longer- and shorter-term leases, as well as through retaining existing tenants, and attracting new ones.
- Tenant sales per square foot in Q4 FY2020 recovered to 94.5% of Q4 FY2019 level.
Status of Current Ongoing AEIs:
- Six Battery Road – completion has been revised to end-2021 (from Q3 FY2021); due to phased works, leasing of the upgraded space is expected to take longer.
- 21 Collar Quay – WeWork has committed to a 7-year lease and is expected to start from Q4 FY2021.
- Lot One Shoppers’ Mall – Upgraded space was handed over to most tenants for internal fit-out work in Q4 FY2020. The cinema and library are expected to open in 2H FY2021.
- Both the retail and office markets in Singapore would be supported by a lack of supplies or limited new completion in the immediate term.
- However, market rentals are expected to continue to be under pressure in the short-term with the ongoing Covid-19 pandemic, along with a challenging business operating environment.
Q&A with CEO Mr Tan Tee Hieong
3-Year Plan for CICT:
- Immediate task is to protect the REIT’s portfolio occupancy and ensure the sustainability of their tenants or bring in new ones.
- At the same time, a review (which will take around 1-2 years) will be conducted to identify assets for AEI, or to divest to recycle capital and acquire other value-added assets.
- The REIT is proactively seeking acquisition opportunities in Singapore, as well as in other developed countries such as in Germany (where the REIT currently have 2 properties in the country.)
- ESG will also remain a key focus area for the REIT with their full commitment on sustainable growth and sound corporate governance.
- Finally, the REIT expects to have interest cost savings in FY2021 as their maturing debts have higher interest rates compared to new debts raised in recent months.
Future of Malls and Offices, and How CICT is Preparing for the Change:
- Malls and offices are essential and will continue to stay, according to the CEO. However, the question is in what form. As such, the REIT will continue to remain proactive, nimble, and flexible to face the challenges, and play their part in shaping the malls and offices, including increasing the focus on integrated developments.
- The REIT will, through active portfolio management, tap on the broader retail and office leasing network to drive efficient tenant negotiations and harness opportunities in flexible space solutions and ecommerce platforms.
- Last but not least, the CEO is of the opinion that post the pandemic, typical lease structures could resume as their are other value-add such as network, variety of trade offerings, shopper traffic, safety, and security that they bring to the malls and offices.
Notice of AGM
The blue-chip REIT will be holding its AGM on Wednesday, 14 April 2021, at 2.00pm.
Due to the current Covid-19 arrangements, the meeting will be held virtually (as like last year). If you are a unitholder of the REIT, you can sign up to attend the meeting here. However, do take note that the deadline to register is on Sunday, 11 April 2021, at 2.00pm. Authenticated unitholders will receive a confirmation email by 13 April 2021, at 4.00pm, with the login details to attend the meeting itself.
I will be attending the meeting as a unitholder of the REIT, and for the benefit of those who weren’t able to attend, I will e posting a summary of it in a separate post in due course (if you are interested, do keep a lookout for it.)
In relation to its upcoming AGM, I have submitted the following questions to seek the managent’s insights:
- I understand that the REIT is open to expanding its presence in other geographical locations. May I know which locations (apart from Germany) or regions the REIT has shortlisted?
- What are the properties to which the REIT has a ROFR to from its sponsor?
- In terms of asset type mix, are there any percentage of each asset type which the REIT is looking to maintain (i.e. X% of its portfolio consisting of retail properties, Y% of its portfolio consisting of office properties, and Z% of its properties consisting of integrated developments.)
- Letter to Unitholders
- Annual Report for FY2020
- Notice of AGM
- Proxy Form
- Announcement of AGM
- Presentation Slides before the AGM
- SIAS-CICT Virtual Dialogue Session
Disclaimer: At the time of writing, I am a unitholder of CapitaLand Integrated Commercial Trust.
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