CapitaLand Integrated Commercial Trust (SGX:C38U), or CICT for short, is a Singapore-listed REIT that invests in retail (29.4% concentration), office (40.0% concentration), as well as integrated development (29.9% concentration) properties in Singapore, Germany, and most recently, made its foray into Australia (with the acquisition of 2 office properties and 1 integrated development property in December 2021.)

In terms of geographical exposure by portfolio property value, the REIT is still predominantly Singapore-focused (at 92%), followed by Germany (at 4%), and Australia (at 4%.)

This morning (28 July), the REIT released its results for the first half of the financial year ended 30 June 2022, and as a unitholder, I have studied the documents posted and in this post, you’ll find the most important points to take note of, along with my thoughts (as a unitholder) about its financial results, portfolio occupancy and debt profile, and also its distribution payout declared by the management this time round.

Let’s begin:

Financial Results (1H FY2021 vs. 1H FY2022, and Q2 FY2021 vs. Q2 FY2022)

In this section, you’ll read about the REIT’s financial results both on a year-on-year (y-o-y) basis (i.e. 1H FY2021 vs. 1H FY2022), and also on a quarter-on-quarter (q-o-q) basis (i.e. Q2 FY2021 vs. Q2 FY2022 – which I have manually computed based on the financial figures from the first quarter, as well as from the first half of the respective financial years):

1H FY2021 vs. 1H FY2022:

1H FY20211H FY2022Variance (%)
Gross Revenue
(S$’mil)
$645.7m$687.6m+6.5%
Property Operating
Expenses (S$’mil)
$173.5m$186.0m+7.2%
Net Property
Income (S$’mil)
$472.2m$501.6m+6.2%
Distributable Income
to Unitholders
(S$’mil)
$343.2m$355.1m+3.5%

CICT’s gross revenue and net property income saw mid-single percentage growths compared to last year, which can be attributed to contributions from the enlarged portfolio following the acquisitions of 66 Goulburn Street, 100 Arthur Street, 50% interest in 101-103 Miller Street and Greenwood Plaza in Sydney, Australia, and 70% interest in CapitaSky, along with lower rental waiver granted to tenants.

Property operating expenses went up by 7.2% due to expenses from the newly acquired properties, higher utilities, consultancy, and general and administrative expenses.

Q2 FY2021 vs. Q2 FY2022:

Q2 FY2021Q2 FY2022Variance (%)
Gross Revenue
(S$’mil)
$310.9m$347.9m+11.9%
Property Operating
Expenses (S$’mil)
$85.8m$94.6m+10.2%
Net Property
Income (S$’mil)
$225.1m$253.3m+12.6%

My Observations: On a q-o-q basis, the REIT’s gross revenue and net property income growth fared better, as they both recorded double-digit percentage improvements, due to contributions from the newly acquired properties, as well as lower rental waiver granted to tenants. On the other hand, the climb in its property operating expenses was due to expenses incurred from the newly acquired properties.

Portfolio Occupancy Profile (Q1 FY2022 vs. Q2 FY2022)

When it comes to reviewing a REIT’s portfolio occupancy profile, I will compare the statistics recorded for the current quarter under review (in this case it is Q2 FY2022 ended 30 June 2022) against that recorded in the previous quarter 3 months ago (in this case it will be for Q1 FY2022 ended 31 March 2022) to find out whether or not it has continue to remain resilient (if not, I’ll dive in further to find out which aspect has weakened, and why.)

In the table below, you’ll find a breakdown of its portfolio occupancy profile by its property type – retail, office, and integrate development:

Q1 FY2022Q2 FY2022
Retail:
Portfolio Occupancy (%)
WALE (by GRI – years)

96.6%
2.0 years

96.5%
2.1 years
Office:
Portfolio Occupancy (%)
WALE (by GRI – years)

91.4%
4.0 years

91.9%
4.1 years
Integrated Development:
Portfolio Occupancy (%)
WALE (by GRI – years)

97.6%
5.4 years

97.4%
5.5 years

My Observations: The slight 0.1 percentage point (pp) dip in the REIT’s retail portfolio occupancy rate was due to a decline in occupancy rate in Funan (down from 97.6% in Q1 FY2022 to 95.4% in Q2 FY2022), Clarke Quay (down from 71.8% in Q1 FY2022 to 71.2% in Q2 FY2022 due to the expiry of leases), Westgate (down from 98.1% in Q1 FY2022 to 97.5% in Q2 FY2022), as well as in Bedok Mall (down from 98.7% in Q1 FY2022 to 97.8% in Q2 FY2022.) Another thing to note is that, apart from the occupancy rate in Clark Quay, the REIT’s other retail malls have occupancy rates of above 90.0% – which in my opinion is very strong.

The REIT’s office portfolio is the only one (among the 3 property types) that saw an increase in its occupancy rate (compared to the previous quarter) by 0.5pp – this is due to an increase in occupancy rate in the following properties: Asia Square Tower 2 (up from 97.5% in Q1 FY2022 to 98.3% in Q2 FY2022), Capital Tower (up from 76.6% in Q1 FY2022 to 77.1% in Q2 FY2022), CapitaSpring (up from 98.5% in Q1 FY2022 to 99.5% in Q2 FY2022), Raffles City Office Tower (up from 96.1% in Q1 FY2022 to 99.4% in Q2 FY2022), as well as 100 Arthur Street (in Australia, with its occupancy up from 62.3% in Q1 FY2022 to 68.8% in Q2 FY2022.) As far as portfolio occupancies of its office properties are concerned, for Singapore, all of them are above 90.0%, except for Capital Tower (at 77.1%), and Six Battery Road (at 87.4%); for Australia (all of them newly acquired), with the exception of 101-103 Miller Street (which is 92.1% occupied), the other 2 properties currently have occupancy rates below 90% – 66 Goulburn Street at 86.0%, and 100 Arthur Street at 68.8%.

Finally, the occupancy rate of integrated developments have edged down by 0.2pp, due to a decrease in occupancy rate in Funan (down from 98.5% in Q1 FY2022 to 97.2% in Q2 FY2022.)

Debt Profile (Q1 FY2022 vs. Q2 FY2022)

Just like how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will also review its debt profile by taking the stats reported this year and compare them with stats reported in the previous quarter 3 months ago, as follows:

Q1 FY2022Q2 FY2022
Aggregate Leverage
(%)
39.1%40.6%
Interest Coverage
Ratio (times)
4.2x4.1x
Average Term to Debt
Maturity (years)
3.9 years4.4 years
Average Cost of
Debt (%)
2.3%2.4 years

My Observations: Compared to the previous quarter, the REIT’s debt profile went down slightly – with its aggregate leverage edging up by 1.5pp (to 40.6%, due to the completion of the acquisitions), interest coverage ratio inching down slightly to 3.1x, and cost of debt up slightly to 2.4%.

On the flip side, as at 30 June 2022, about 81% of the REIT’s total borrowings are on fixed rate borrowings – in my opinion, this provides a good level of “protection” against potential risks associated with interest rate hikes.

In terms of debt maturity, it is well-staggered over the next couple of years – with 6% (or S$598m) of its borrowings due in the second half of the current financial year 2022, 12% (or S$1,173m) of its borrowings expiring in FY2023, 11% (or S$1,099) of its borrowings expiring in FY2024, and 71% (or S$7,172) of its borrowings only expiring in FY2025 and beyond (which is quite a number of years from now.)

Distribution Payout to Unitholders (1H FY2021 vs. 1H FY2022)

The management of CapitaLand Integrated Commercial Trust declares a distribution payout to its unitholders on a half-yearly basis – once when it releases its results for the first half of the financial year (which is now), and once when it releases its results for the second half of the financial year (usually around mid- to end-January.)

For the current period under review (i.e. 1H FY2022), the REIT’s management have declared a distribution of 5.22 cents/unit – this is a 0.8% increase from the distribution payout of 5.18 cents/unit declared in the same time period a year ago (i.e. 1H FY2021.)

If you are a unitholder of the REIT, do take note of the following dates regarding its distribution payout:

Ex-Date: 04 August 2022
Record Date: 05 August 2022
Payout Date: 09 September 2022

Closing Thoughts

Personally, I would say that CICT’s latest set of results was a stable one – with its financial performance recording a y-o-y and q-o-q increase due to contributions from the newly acquired properties, along with lower rental rebates granted to tenants; no doubt the portfolio occupancy level of its retail and integrated development properties saw slight declines, but in my opinion it still remains very strong (as their occupancy levels for the 3 property types [in retail, office, and integrated development] are still above 90.0%); the same can also be said for its debt profile – even though it has weakened slightly compared to the previous quarter, but there still remains some debt headroom before the regulatory limit is reached, and that the REIT has a good amount of “protection” against risks associated with interest rate hikes with 80% of its borrowings hedged at fixed rates.

To conclude, the REIT’s latest “report card” is one I am satisfied with.

With that, I have come to the end of my review of CapitaLand Integrated Commercial Trust’s results for the first half of the financial year 2022. Do note that all the opinions you have read in this post are for educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. You should always do your own due diligence before you make any investment decisions.

Related Documents

Disclaimer: At the time of writing, I am a unitholder of CapitaLand Integrated Commercial Trust.

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