CapitaLand Integrated Commercial Trust Results: Office Portfolio the Bright Spot

CapitaLand Singapore stock

Tim Phillips

May 10, 2022

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As shoppers in Singapore return to malls and partake in some “revenge spending”, dividend investors should also ponder what that means for their favourite Singapore real estate investment trusts (REITs).

That’s because there’s been a slew of earnings updates from Singapore REITs in recent weeks.

One of the biggest retail and commercial REITs – CapitaLand Integrated Commercial Trust (SGX: C38U) – provided its own Q1 2022 update at the end of April.

Also known as “CICT”, the REIT is the biggest REIT (by market cap) listed on the SGX. With a focus on mainly Singapore properties, it’s a good gauge of how the local economy is faring.

So, how did CICT perform in the first quarter of 2022? Here’s what investors should know.

Net property income up marginally by 0.5%

While retail REIT peer Frasers Centrepoint Trust (SGX: J69U) reported a solid H1 2022 earnings report, by contrast CICT’s numbers were underwhelming.

The REIT – which owns 25 properties valued at S$23.8 billion across Singapore, Australia and Germany – only saw its gross revenue rise by 1.5% year-on-year to S$339.7 million in the first quarter of 2022.

On the net property income (NPI) side, this number came in at S$248.3 million for the period – up only 0.5% year-on-year (see below).

CICT revenue profit breakdown Q1 2022

Source: CapitaLand Integrated Commercial Trust Q1 2022 business update

While the REIT did see broadly improved performance across its retail, office and integrated development assets, portfolio occupancy did fall slightly in the former two.

Additionally, the gross revenue uplift was offset by a rise in utilities expenses, perhaps not a huge surprise given higher inflation and surging energy prices.

CICT’s office portfolio the bright spot

While the REIT’s overall portfolio occupancy fell slightly in the first quarter, to 93.6% as of 31 March 2022, its portfolio’s weight average lease expiry (WALE) was stable at 3.7 years at the end of the first quarter.

While it did see a negative rental reversions in its retail portfolio of 1.3%, the REIT attributes this to the “rejuvenation of tenant mix” at Raffles City Singapore.

CICT’s downtown malls saw a much bigger fall in average incoming vs. average outgoing rents, with a 3.1% drop in the first quarter of 2022.

There was some good news during the quarter from the REIT’s office portfolio, with particularly noticeable improvement in the occupancy rate of its Singapore office properties (see below).

That’s a net positive as Singapore makes up 93% of the REIT’s overall portfolio by property value.

CICT office portfolio occupancy Q1 2022

Source: CapitaLand Integrated Commercial Trust Q1 2022 business update

Outlook more positive for rest of 2022

Management of CICT remain fairly optimistic on the return of tourists, as well as employees returning to working from the office.

While the latter is certainly starting to show up in the figures, downtown retail properties may not fully recover until Chinese tourists resume overseas travel.

On the outlook for the office market, management noted that Grade A office rents in the CBD are expected to grow by close to 7% year-on-year in 2022, according to CBRE. That should bode well for CICT’s office portfolio.

Based on the REIT’s latest unit price of S$2.22, shares are currently offering income investors a 12-month forward dividend yield of 4.7%.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.