THE robust economy - and the rent increases it delivered - allowed CapitaCommercial Trust (CCT) to deliver a bumper result yesterday and bask in a rising share price.
Distributable income for the June quarter shot up 23.2 per cent from a year ago to $36.1 million. Investors will benefit from a 22.6 per cent rise in distributions to 2.6 cents per unit.
Gross revenue climbed 25 per cent to $74.4 million while net property income rose 18.6 per cent to $51.5 million.
The strong results sent the shares up seven cents to $1.98.
Mr Richard Hale, the chairman of CCT’s manager, said Singapore’s economic performance had driven the trust’s higher net asset value and rental revenue for the three months to June 30. He also cited the ’still steady office demand underpinned by the country’s solid economic fundamentals’.
Mr Hale tipped that the good times will roll for a while yet: ‘Given Singapore’s attractiveness as a global city and the tight office supply, we are confident of exceeding our forecast distribution per unit of 10.61 cents for the financial year ending 2008.’
CCT achieved a distributable income of $71.9 million and a distribution per unit of 5.19 cents for the first six months of the year.
The annualised first-half distribution per unit of 10.44 cents would provide a distribution yield of 5.5 per cent, based on the July 22 closing price of $1.91 per unit.
CCT’s total asset size is now close to $7 billion - following its July 11 completion of the $1.165 billion purchase of 1 George Street, ahead of its 2009 target size of $6 billion. The trust said its gearing is at a prudent 35.7 per cent.
New leases and renewals contracted over the first half of the year registered average rent increases of 193 per cent for office space and 52 per cent for retail, said Ms Lynette Leong, the chief executive of CCT’s manager.
Ms Leong said there remains ‘considerable potential’ rental upside as the prevailing rents of leases not yet due for renewal are still substantially below market rates.
Despite slower economic growth and increased stagflation fears, office rents continued to rise in the second quarter, albeit at a slower rate. They averaged $18.80 per sq ft (psf) per month for Grade A space and $16.10 psf for prime space.
While some property consultants have said that office rents are peaking, CCT remains confident.
‘Notwithstanding the current weak macroeconomic sentiments, demand for space in our portfolio, especially by the financial institutions and supporting business services, remains continually steady,’ said Ms Leong.
Moody’s Investors Service recently downgraded CCT’s A3 corporate family rating to Baa1, and its Baa1 senior unsecured ratings to Baa2, which reflects the entirely debt-funded nature of its purchase of 1 George Street.
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