CCT’s Grade A office tenants expand, renew or sign new leases

Source : Channel NewsAisa - 4 Sep 2008

CapitaCommercial Trust (CCT) announced on Thursday that its Grade A office tenants at Capital Tower and One George Street have either expanded, renewed or signed new leases.

The news brought some cheer to its share price, which has been beaten down in recent weeks. The stock closed a notch higher at S$1.73 a share, up from S$1.70, following the news on Thursday.

While rental prices were not revealed, CCT said the rates were at the higher end of the buildings’ micro-market rental rates. Analysts have pegged it at about S$15 per square foot per month for Capital Tower, and S$15-S$18 per square foot per month for One George Street.

Capital Tower will soon be home to more JPMorgan staff under the new lease arrangement, while another tenant, BHP Billiton, has renewed its lease. One George Street also has Shinhan Bank taking up a new lease.

Analysts said the impact on CCT’s earnings will not be significant as the 78,000 square feet represents only about 2 per cent of its portfolio’s total rentable area. But they noted that this piece of good news has come at a good time.

Brandon Lee, investment analyst, DMG & Partners Research, said: “In terms of sentiments, it’s fairly positive, given the recent spate of negative news about asset devaluations and drop in rental rates. With JPMorgan leasing out extra space, it shows that there’s a certain kind of resilience in Singapore’s service sector.”

The impact of this news on CCT’s share price was marginal following the massive sell-off it saw in recent weeks. Year-to-date CCT share is down by 30 per cent – a decent entry point for investors, according to analysts.

“I’m looking at this more as a dividend play rather than a capital appreciation play because if you look at the universe of S REITs, currently the counter with the highest potential in DPU growth is either Suntec REIT or CCT,” said Lee, who expects a yield of between 6 and 7.5 per cent for CCT in 2008 and 2009.

Nonetheless, CCT’s good news is unlikely to spill over into CapitaLand, which owns 30 per cent of it because CapitaLand is seen to be suffering more from continued weakness in markets such as Vietnam and Thailand.