CapitaLand Integrated Commercial Trust (SGX:C38U), Singapore’s largest REIT, and also one of the largest REIT in Asia-Pacific, held its virtual annual general meeting (AGM) earlier this afternoon (14 April 2021.)
The meeting was a quick one (just 20 minutes from start to finish) where the CEO went through an update, followed by the passing of the 4 resolutions. There weren’t any live questions and answer section, nor any further elaboration on their responses to selected questions submitted by unitholders, particularly relating to its debt profile, where I know some unitholders were concerned about the increase in its aggregate leverage to 40.6% post-merger.
In this post, you’ll find a summary of the CEO’s presentation, along with results of the 4 resolutions put to vote, and a follow-up to the questions I’ve submitted when I registered to attend the meeting:
Summary of CEO Tony Tan Tee Hieong’s Presentation
- For the fourth quarter, the REIT’s gross revenue and net property income improved by 36.0% (to S$276.5m) and 36.4% (to S$191.9m) respectively compared to the same time period last year, due to contributions from the office and integrated development properties from CapitaLand Commercial Trust as a result of the merger.
- However, on a full-year basis, its gross revenue and net property income fell by 5.3% (to S$745.2m) and 8.1% (to S$512.7m) respectively due to rental waivers (of S$128.4m) granted to tenants affected by the Covid-19 pandemic.
- Distributable income to unitholders for FY2020 fell 16.4% to S$369.4m due to retained capital distribution, and tax-exempt income distribution of S$12.5m received from CapitaLand China Trust (SGX:AU8U) for the period between 14 August 2019 and 25 November 2020 for general corporate and working capital purposes.
- Distribution per unit for FY2020 was down 27.4% (compared to last year) to 8.69 cents/unit. In particular, distribution per unit for the period between 21 October and 31 December 2020 was based on an enlarged unit base due to the issuance of 2,780,549,536 new units as consideration units for the Merger (with CapitaLand Commercial Trust to form the enlarged CapitaLand Integrated Commercial Trust) on 28 October 2020.
- Occupancy rate of 98.0% (as at 31 December 2020) was higher than the average occupancy rate of 91.2% recorded islandwide.
- In the fourth quarter of 2020, shopper traffic to the REIT’s malls recovered to 67.9% of the level recorded a year ago. This statistic has further improved to close to 75.0% of pre-Covid levels currently.
- Tenants’ sales per square foot for the fourth quarter of 2020 also recovered to 94.5% of pre-Covid levels, which Mr Tan attributed this to the strong performance of the REIT’s suburban malls.
- Portfolio occupancy rate of the REIT’s office properties was 94.9% (as at 31 December 2020), higher than the average islandwide occupancy rate of 93.8%.
- Mr Tan shared that the REIT has diversified sources of funding, with 83% of its borrowings on fixed rate.
- Aggregate leverage, as at 31 December 2020, was at 40.6%. Moving forward, Mr Tan said that the REIT will remain disciplined and prudent on its debt management.
- 13% of the REIT’s debt be expiring in 2021 (to which Mr Tan assured that there are facilities in place to refinance them.)
Asset Enhancement and Portfolio Growth:
- Some of the asset enhancement works include the rejuvenation works in Lot One Shoppers’ Mall (with TOP obtained on 29 October 2020 and handed over to most tenants for internal fit-out works; cinema and library expected to open in 2H 2021), the revitalisation of Six Battery Road (works target to complete by end-2021), and the enhancement of 21 Collar Quay (where the 7-year lease to WeWork is expected to commence in 4Q 2021.)
- Apart from identifying assets to undergo asset enhancement initiative works, Mr Tan also shared that the REIT is also looking at possible redevelopment opportunities, along with portfolio recycling.
3-Year Trading Performance:
- Mr Tan highlighted that the REIT’s trading performance over a 3-year period outperformed the STI, FTSE ST REIT, as well as the FTSE Real Estate albeit being impacted by significant market volatility in 2020.
- Total return from 2018 to 2020 was 16.51%.
- On the outlook of the office markets, Mr Tan is of the opinion that it will continue to remain resilient, considering the limited new supply of new office spaces, coupled with demand gradually increasing with the economy recovering.
- Finally, Mr Tan was cautiously optimistic of a better 2021 ahead, due to the relaxation of the safe distancing measures, along with a rollout of vaccination.
Results of the Resolutions
- Ordinary resolution #1, which was to receive and adopt the Trustee’s report, the Manager’s statement, the audited financial statements of CapitaLand Integrated Commercial Trust for the financial year ended 31 December 2020 and the auditor’s reports thereon was passed with 99.80% (or 4,335,101,986) of the votes for, and 0.20% (or 8,593,817) of the votes against.
- Ordinary resolution #2, which was to re-appoint KPMG LLP as the auditors of CapitaLand Integrated Commercial Trust, and to authorise the Manager to fix the auditors’ renumeration was passed with 97.46% (or 4,230,236,710) of the votes for, and 2.54% (or 110,429,439) of the votes against.
- Ordinary resolution #3, which was to authorise the Manager to issue units and to make or grant convertible instruments, was passed with 93.94% (or 4,080,379,446) of the votes for, and 6.06% (or 263,300,426) of the votes against.
- Ordinary resolution #4, which was to approve the renewal; of the unit buy-back mandate, was passed with 99.80% (or 4,333,904,121) of the votes for, and 0.20% (or 8,593,817) of the votes against.
Follow-Up on Questions Submitted
Finally, here’s a follow-up on the 3 questions I have submitted when I signed up to attend the e-AGM, where two of them were addressed:
The first question was on the REIT’s expansion into other geographical locations, apart from Singapore and Germany, to which the response was as follows (and I quote):
“At this point, our immediate focus is in Singapore and Germany where we already own assets. However, given current COVID-19 pandemic, there are varied levels of impact on the different developed markets. We are closely monitoring the different developed markets as new opportunities not present previously, could surface.”
My other question was on the properties to which the REIT has a Right of First Refusal (ROFR) to from its Sponsor, the response was as follows (and I quote):
“CICT has a right of first refusal over income-producing real estate used, or primarily used, for commercial purposes (including retail and/or office purposes) located in Singapore that is identified and targeted for acquisition by CapitaLand Singapore Limited and/or its subsidiaries (CICT ROFR). There are currently no such properties over which the CICT ROFR applies.
For completeness, CICT has a call option over, amongst others, the commercial component of CapitaSpring, an integrated project under development which is expected to complete in 2H 2021. The aforementioned call option can be exercised at any time within a period of five years commencing on the date of issuance of the temporary occupation permit for CapitaSpring.”
Disclaimer: At the time of writing, I am a unitholder of CapitaLand Integrated Commercial Trust.