Published October 24, 2008

CCT Q3 distributable income rises 46.1%

Results boosted by higher gross rental income and income from 1George St

By ARTHUR SIM

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CAPITACOMMERCIAL Trust (CCT) has reported distributable income of $43.2 million for the third quarter ended Sept 30, up 46.1 per cent from $29.6 million a year earlier and 3.8 per cent above the Reit manager's forecast.

Ms Leong: 'For $580 million of debt maturing next year, CCT is evaluating refinancing proposals received from banks and the cost is expected to be competitive'

The strong result was attributed to higher gross rental income from CCT's portfolio and income from 1 George Street from July 11. Q3 net income from 1 George Street was $11.09 million.

The trust's distribution per unit (DPU) of 3.1 cents for Q3 is 44.9 per cent more than in Q3 2007 and 4 per cent above forecast.

Its gearing ratio rose to 36.3 per cent in Q3, from 29.1 per cent previously. Total debt increased to $2.54 billion, from $1.83 billion.

Lynette Leong, CEO of the Reit manager, said: 'We have always employed a pro-active approach in the execution of our capital and risk management strategies. CCT's current gearing is at a prudent level of 36.3 per cent and the interest cost for 2008 is 100 per cent fixed.'

The trust's interest service coverage ratio at end September was 3.1 times and its average cost of debt was 3.6 per cent.

Ms Leong said that for $580 million of debt maturing next year, CCT is evaluating refinancing proposals received from banks and the cost is expected to be competitive. 'We intend to finalise the refinancing well in advance of the debt maturity,' she said.

Property operating expenses of $25.8 million rose $8.4 million or 48 per cent in Q3 due to the acquisition of 1 George Street, as well as higher property tax, utility costs and maintenance costs for other properties.

The trust's expenses of $2.4 million rose $1.1 million or 83.7 per cent, due to higher professional fees and unit-holders' expenses.

Borrowing costs of $25.5 million rose $12.8 million or 101.5 per cent, due mainly to an increase in borrowing from the issue of $335 million of fixed-rate notes, a $650 million term loan and $370 million of convertible bonds and amortisation cost on upfront fees and expenses incurred on the convertible bonds.

CCT said its office properties are likely to perform well for the rest of the year as it expects positive rental reversions for leases expiring in the current Q4.

'This is because the average passing rent for CCT's office portfolio is only $7.20 psf per month and is significantly below market,' it said.

CCT also expects rental declines to be mitigated by low new office supply for the rest of 2008 and in 2009.

Q3 earnings per unit on a fully diluted basis were 1.51 cents, down from 1.69 cents a year ago.

CCT's unit price closed unchanged at $1.02 yesterday.