25 January 2018
CAPITALAND COMMERCIAL TRUST
Commentary on the competitive conditions of the industry in which the group operates and any known
factors or events that may affect the group in the next reporting period and the next 12 months
The Trust achieved higher distributable income despite a challenging Singapore office market in 2017. CCT’s
distributable income grew by 7.4% to S$288.9 million, up from S$269.0 million in the previous year. The year-onyear
increase was due to stronger performance from CapitaGreen, a S$4.4 million top up for the loss of distributable
income arising from the divestments of One George Street (50.0% interest) and Wilkie Edge and a S$8.0 million taxexempt
income distribution.
The Trust embarked on another successful cycle of portfolio reconstitution in 2017 by unlocking value with the
divestments of Wilkie Edge and a 50.0% interest in One George Street at exit yields of 3.4% and 3.2% respectively
and redeploying divestment proceeds to the acquisition of Asia Square tower 2 (“AST2”), a higher yielding asset, as
well as the redevelopment of Golden Shoe Car Park.
On 13 July 2017, the Manager had announced the formation of a joint venture between CCT (45.0% interest),
CapitaLand Singapore Limited (45.0% interest), a wholly owned subsidiary of CapitaLand Limited, and Mitsubishi
Estate Co., Ltd (10.0% interest), to redevelop Golden Shoe Car Park into an integrated development comprising
Grade A office, ancillary retail, serviced residence and food centre with a gross floor area of approximately one
million square feet. The redevelopment of Golden Shoe Car Park is expected to be completed in the first half of
2021 and will further strengthen CCT’s lead as the largest commercial landlord in Singapore’s Central Business
District by net lettable area.
On 1 November 2017, CCT completed the acquisition of AST2. The acquisition was funded by divestment proceeds,
bank borrowings and a S$700.0 million rights issue that was over-subscribed by 1.8 times. The Manager
appreciates the support from unitholders on the rights issue. The committed occupancy of AST2 was 90.5% as at
end December 2017. CCT will continue to proactively lease the balance space to enhance income.
CCT’s S$175.0 million convertible bonds were fully converted into 122.7 million CCT units before its maturity date of
12 September 2017 at the conversion price of S$1.4265 per unit. The Trust has a healthy balance sheet with an
aggregate leverage of 37.3% (well below the regulatory limit of 45.0%) and an average cost of debt of 2.6% as at 31
December 2017. About 80% of the Trust’s borrowings are pegged at fixed rates, which offer greater certainty of
interest expense in a rising interest rate environment. The Manager continues to adopt a proactive capital
management strategy to optimise the average term to maturity and cost of borrowings. For the S$1.12 billion bridge
facility obtained for the acquisition of Asia Square Tower 2 due in 2019, CCT has obtained S$600 million in
unsecured bank loans to refinance it ahead of its maturity. The Trust awaits the right opportunity and timing to
refinance the remaining S$520.0 million.
Outlook for 2018
Based on data from CBRE Pte. Ltd., Singapore’s Core CBD and Grade A occupancy rates in 4Q 2017 were 93.8%,
with the Grade A occupancy rate tracking an uptick of 2.2% from 91.6% in 3Q 2017. Average monthly rent for
Grade A offices rose to S$9.40 per square foot in 4Q 2017, an increase of 3.3% year-on-year. Market rents are
expected to rise in light of limited new office supply in the next few years and reported high pre-commitment levels of
recently completed and upcoming office buildings in the CBD. Lower net property income is expected in FY 2018 at
some CCT properties given the flow through from negative rent reversions of leases committed in 2017 into 2018
and that rents of leases expiring in 2018 are higher than current market rent. However, CCT will leverage on rising
market rents to close the gap between signing and committed rents.
factors or events that may affect the group in the next reporting period and the next 12 months
The Trust achieved higher distributable income despite a challenging Singapore office market in 2017. CCT’s
distributable income grew by 7.4% to S$288.9 million, up from S$269.0 million in the previous year. The year-onyear
increase was due to stronger performance from CapitaGreen, a S$4.4 million top up for the loss of distributable
income arising from the divestments of One George Street (50.0% interest) and Wilkie Edge and a S$8.0 million taxexempt
income distribution.
The Trust embarked on another successful cycle of portfolio reconstitution in 2017 by unlocking value with the
divestments of Wilkie Edge and a 50.0% interest in One George Street at exit yields of 3.4% and 3.2% respectively
and redeploying divestment proceeds to the acquisition of Asia Square tower 2 (“AST2”), a higher yielding asset, as
well as the redevelopment of Golden Shoe Car Park.
On 13 July 2017, the Manager had announced the formation of a joint venture between CCT (45.0% interest),
CapitaLand Singapore Limited (45.0% interest), a wholly owned subsidiary of CapitaLand Limited, and Mitsubishi
Estate Co., Ltd (10.0% interest), to redevelop Golden Shoe Car Park into an integrated development comprising
Grade A office, ancillary retail, serviced residence and food centre with a gross floor area of approximately one
million square feet. The redevelopment of Golden Shoe Car Park is expected to be completed in the first half of
2021 and will further strengthen CCT’s lead as the largest commercial landlord in Singapore’s Central Business
District by net lettable area.
On 1 November 2017, CCT completed the acquisition of AST2. The acquisition was funded by divestment proceeds,
bank borrowings and a S$700.0 million rights issue that was over-subscribed by 1.8 times. The Manager
appreciates the support from unitholders on the rights issue. The committed occupancy of AST2 was 90.5% as at
end December 2017. CCT will continue to proactively lease the balance space to enhance income.
CCT’s S$175.0 million convertible bonds were fully converted into 122.7 million CCT units before its maturity date of
12 September 2017 at the conversion price of S$1.4265 per unit. The Trust has a healthy balance sheet with an
aggregate leverage of 37.3% (well below the regulatory limit of 45.0%) and an average cost of debt of 2.6% as at 31
December 2017. About 80% of the Trust’s borrowings are pegged at fixed rates, which offer greater certainty of
interest expense in a rising interest rate environment. The Manager continues to adopt a proactive capital
management strategy to optimise the average term to maturity and cost of borrowings. For the S$1.12 billion bridge
facility obtained for the acquisition of Asia Square Tower 2 due in 2019, CCT has obtained S$600 million in
unsecured bank loans to refinance it ahead of its maturity. The Trust awaits the right opportunity and timing to
refinance the remaining S$520.0 million.
Outlook for 2018
Based on data from CBRE Pte. Ltd., Singapore’s Core CBD and Grade A occupancy rates in 4Q 2017 were 93.8%,
with the Grade A occupancy rate tracking an uptick of 2.2% from 91.6% in 3Q 2017. Average monthly rent for
Grade A offices rose to S$9.40 per square foot in 4Q 2017, an increase of 3.3% year-on-year. Market rents are
expected to rise in light of limited new office supply in the next few years and reported high pre-commitment levels of
recently completed and upcoming office buildings in the CBD. Lower net property income is expected in FY 2018 at
some CCT properties given the flow through from negative rent reversions of leases committed in 2017 into 2018
and that rents of leases expiring in 2018 are higher than current market rent. However, CCT will leverage on rising
market rents to close the gap between signing and committed rents.
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