CapitaLand Retail China Trust's Q4 DPU slips 3.3% to 2.34 S cents

CAPITALAND Retail China Trust (CRCT) on Friday posted a distribution per unit (DPU) of 2.34 Singapore cents for the fourth quarter ended Dec 31, down 3.3 per cent from 2.42 cents a year ago.

This was partially due to an enlarged unit base in Q4 2019 following a private placement and preferential offering in August and September 2019 respectively.

The year-ago DPU of 2.42 cents had also included a capital distribution which arose from a gain from divesting the stake in a company which held CapitaMall Anzhen. Excluding this capital distribution, DPU in Q4 2018 was 2.34 cents, the same as the latest DPU for Q4 2019.

Meanwhile, gross revenue for Q4 2019 grew 23.5 per cent to 347.2 million yuan (S$69.1 million) from 281 million yuan a year ago.

This was driven by the first full-quarter contributions from CapitaMall Xuefu, CapitaMall Yuhuating and CapitaMall Aidemengdun which were acquired in August 2019, the China mall real estate investment trust's (Reit) manager said.

Nonetheless, these were partially offset by lower revenue in CapitaMall Erqi due to the pre-termination of its anchor tenant, as well as a one-off compensation recorded in CapitaMall Wuhu in Q4 2018.

In Singapore-dollar (SGD) terms, gross revenue rose 21.2 per cent or S$11.8 million to S$67.6 million for the latest quarter.

Net property income (NPI) grew 25.3 per cent on the year to 227 million yuan for the quarter, from 181.1 million yuan. In SGD terms, NPI increased 22.9 per cent to S$44.1 million, from S$35.9 million.

Income available for distribution for Q4 came in at S$33.6 million, up 46.4 per cent from S$23 million in the year-ago period.

Unitholders will receive a distribution of 3.61 Singapore cents per unit for the period from Aug 14 to Dec 31, 2019. This comprises the DPU of 2.34 cents for Q4 along with the DPU of 1.27 cents for Aug 14 to Sept 30, 2019.

The distribution will be paid out on March 30, after books closure at 5pm on Feb 17.

For the full year ended Dec 31, DPU after capital distribution fell 3.1 per cent to 9.9 Singapore cents, from 10.22 Singapore cents a year earlier. In SGD terms, full-year gross revenue rose 6.9 per cent to S$238.2 million, while NPI gained 12.2 per cent to S$165.4 million.

Separately, CRCT will sell its entire stake in the company which holds CapitaMall Erqi for about 850.9 million yuan (S$165.2 million) to an unrelated third party.

CRCT's wholly-owned subsidiary has entered into a conditional equity transfer agreement to divest its interest in the holding company, CapitaRetail Henan Zhongzhou Real Estate Co, CRCT announced in a separate filing on Friday.

CapitaMall Erqi is located in Zhengzhou's premier shopping precinct in Henan at No 3, Minzhu Road, Erqi district. The mall has a gross floor area of 92,355.85 square metres and seven retail levels.

If the Reit holds on to the property, it will face increasing capital expenditure commitments as the landlord because the aged building has been in operation for more than 15 years, CRCT's manager said.

The divestment will thus allow CRCT to unlock the cash value from the mall, without incurring major capital expenditure and while avoiding refurbishment downtime in the near future.

The divestment is also timely, given that the master lease agreements over the property have been terminated, the manager added.

Net proceeds from the divestment will amount to 790.8 million yuan, resulting in an estimated net gain of about 65.6 million yuan.

CRCT's manager said that the proceeds may be used to repay debt, finance any capital expenditure and asset enhancement works, capital distribution, new acquisitions, and/or general corporate and working capital requirements.

The independent valuation of the property as at Dec 31, 2019, stood at 645 million yuan. The valuation was commissioned as part of CRCT's yearly valuation of its portfolio, and was carried out by Beijing Colliers International Real Estate Valuation Co using the market approach.

The deal is expected to be completed in the third quarter of this year.

As at 9.33am on Friday, CRCT units were trading at S$1.55, up one Singapore cent or 0.7 per cent.