CapitaLand Commercial Trust's Q1 DPU down 25% to 1.65 cents

CAPITALAND Commercial Trust (CCT) posted a 25 per cent fall in Distribution Per Unit (DPU) to 1.65 cents for the first quarter ended March, due to its retention of taxable distributable income and its decision to withhold distribution of tax-exempt income "as a matter of prudence" amid the Covid-19 outbreak.

Its gross revenue for the quarter inched up 3.8 per cent to S$103.6 million, driven by Main Airport Center, a freehold multi-tenanted office building near the Frankfurt International Airport, which was acquired in September 2019; higher revenue could also be credited to 21 Collyer Quay, CapitaGreen and the Frankfurt property called Gallileo. This was partly dampened by lower income from Asia Square Tower 2, Six Battery Road and Bugis Village. 

CCT's net property income rose marginally by 0.7 per cent to S$80.3 million, as the increase in revenue was partially offset by higher operating expenses. As of end-March, CCT's total deposited property value was S$11.7 billion, while its adjusted net asset value per unit (excluding distributable income payable to unitholders) was S$1.83.

The CCT portfolio's committed occupancy as of end-March was 95.2 per cent, down from 98.0 per cent in the last quarter. This was due to lower occupancy at Six Battery Road, with upgrading works following the lease expiry of an anchor tenant. 

During the quarter, CCT signed about 303,000 sq ft of new leases and renewals, of which 22 per cent were new leases. New demand came from firms in sectors such as financial services, legal services, commodities, and maritime and logistics. 

CCT's aggregate leverage as of end-March inched up to 35.5 per cent, up from 35.1 per cent as of end-2019, due to higher borrowings. It has an interest coverage ratio of 5.7 times. 

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Even amid Covid-19, CCT has renewed a significant proportion of expiring leases or is in advanced negotiations for most major leases due in 2020 "through proactive asset and lease management", said Kevin Chee, chief executive of the trust's manager. 

About two-thirds of the leases (going by gross rental income) that are expiring in 2020 have been renewed or re-let. As of end-March, it had only about 10 per cent of committed office net lettable area to be renewed or re-let for the rest of the year. 

"On the capital management front, CCT continues to be in a strong financial position to meet its financial and operational obligations, with aggregate leverage and interest coverage ratio well within loan covenant thresholds," Mr Chee added.

On its outlook on the German market, CCT noted that CBRE reported market vacancy rates of 4.6 per cent in the Banking District and and 3.2% in the Airport District, where CCT's two properties are separately located. "With the outbreak of COVID-19, leasing and investment activities in Frankfurt's real estate sector have reduced," the company said. 

Units of CCT closed at S$1.57 on Wednesday before the results release, up S$0.07.