CapitaCommercial Trust to revamp portfolio; value falls $328m

It is selling Robinson Point, looking at Starhub Centre redevelopment

OFFICE Reit CapitaCommercial Trust (CCT) wrote down the value of its investment properties by another $327.6 million and unveiled plans to revamp its portfolio.

The trust also said yesterday that it will receive $9.3 million from parent company CapitaLand to make up for a shortfall in income from One George Street.

CapitaLand sold One George Street to CCT in 2008 with a yield protection clause in case the net property income from the property is less than $49.5 million a year. The developer was required to pay for the shortfall for 2009, which resulted from lower operating performance as a result of global economic slowdown as well as the low rental rates for some of the existing leases that have not expired, CCT said.

The Reit also said it will sell Robinson Point to a private fund managed by AEW Asia for $203.3 million. CCT will book a gain of $19.2 million from the sale.

The trust is also looking at redeveloping Starhub Centre at Cuppage Road. The property is currently zoned for purely commercial use but CCT is hoping to convert it into a residential and commercial development.

It has obtained outline planning permission from the Urban Redevelopment Authority to change the use of the property, but the change of use is still subject to other government authorities’ approval. CCT will only decide on the next course of action after all relevant approvals are received, it said.

Both Robinson Point and Starhub Centre are non-Grade A properties, which the trust said have not performed as well as its Grade A projects in the current downturn.

‘Our Grade A offices continue to show resilience by recording an increased average occupancy rate in Q4 2009 to 98.7 per cent, significantly higher than the Grade A office market occupancy rate of 93.8 per cent,’ said Lynette Leong, chief executive of CCT’s manager. In comparison, the overall portfolio occupancy stood at 94.8 per cent in Q4.

Robinson Point was identified as being ripe for divestment. Selling it will allow CCT to re-invest in a Grade A property instead, Ms Leong said. Starhub Centre, which now suffers from lower than usual occupancy, could be given a revamp.

CCT also reported a downward revaluation of its properties from $6.03 billion in May 2009 to $5.7 billion at end 2009. The write-down follows an earlier one in May, where the value of CCT’s portfolio was reduced from $6.71 billion in December 2008.

CCT reported a 39 per cent climb in distributable income to $52.9 million for Q4 2009, from $38 million a year ago. Distribution per unit (DPU) – adjusted for rights units – rose to 1.88 cents from 1.36 cents.

For the full 2009 financial year, CCT reported a distributable income of $198.5 million, up 30 per cent from $153 million in 2008. The full year DPU (adjusted for rights units) of 7.06 cents is a 29 per cent year-on-year increase from 2008 DPU of 5.48 cents.

Source : Business Times – 21 Jan 2010