Published January 23, 2009

CapitaMall Trust DPU dips in Q4

Trust exploring options to refinance $876.2m of debt

By UMA SHANKARI

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CAPITAMALL Trust (CMT), Singapore's biggest property trust, said that distributable income for the fourth quarter fell 2.1 per cent as it faced higher finance costs.

Distributable income for the three months ended Dec 31, 2008, was $61 million, down from $62.3 million in 2007. Distribution per unit (DPU) fell to 3.65 cents, from 3.82 cents in 2007.

The trust is a unit of Singapore's largest property group, CapitaLand. Q4 net property income rose 11.1 per cent to $85.9 million, from $77.3 million in Q4 2007.

Turnover was boosted by Atrium@Orchard, which CMT bought in August 2008, as well as higher revenue from new and renewed leases and from the completion of asset enhancement works.

But finance costs rose 61.4 per cent to $30 million, causing a year-on- year drop in Q4 net income. The increased finance costs were partly due to the convertible bonds CMT issued to fund the Atrium acquisition.

For the full 2008 financial year, distributable income rose 12.9 per cent to $238.4 million, up from $211.2 million in 2007. DPU rose to 14.29 cents from 13.34 cents.

'The majority of the retail trades across CMT's portfolio of malls are still faring well for full year 2008, although there were some signs of weakening in discretionary spending towards end-2008,' said Lim Beng Chee, chief executive of the trust's manager.

Last year, CMT signed 363 new and renewed leases at average rents 9.3 per cent higher than preceding rentals, which were typically committed some three years ago.

Gross rental revenue locked-in for 2009 already exceeds 87 per cent of 2008's total gross revenue. 'This will underpin the net property income for 2009,' said the trust.

Mr Lim remains confident that CMT's tenants will continue to stay on in its malls, even as retail sales are expected to drop this year.

The trust will take a pro-active approach to engage its tenants and meet up with them more often, he said.

Mr Lim also pointed out that turnover rent (where CMT takes a cut of tenants' sales) contributed just 2-4 per cent of CMT's total gross revenue in 2008.

The trust is also exploring options to refinance $876.2 million of debt before it matures in the second half of 2009.

CMT hopes to refinance all debt in one go and is already in talks with banks. Analysts said that refinancing should not be a problem as another one of CapitaLand's Reits, CapitaCommercial Trust, was able to refinance at attractive rates recently.

CMT, which owns 14 retail malls in Singapore, last quarter said that it will put some upgrading plans for its properties on hold. The trust in May 2008 also raised its target asset size to $9 billion by 2010 from an earlier forecast of $8 billion.

Yesterday, CMT said that total assets rose 1.9 per cent to $7.2 billion on the latest revaluation.

'CMT remains one of our top picks in the S-Reit (Singapore real estate investment trust) space,' said Macquarie Research analysts Tuck Yin Soong and Elaine Cheong yesterday as they issued an 'outperform' call on the stock. CMT shares lost two cents to close at $1.48 yesterday.