Since its incorporation in 1935, United Overseas Bank (SGX:U11), or UOB for short, have grown to become one of the leading banks in Asia, along with being rated as one of the world’s top banks.

Currently, the bank have a global network of around 500 offices in 19 countries and territories in Asia Pacific (1 in Australia, 2 in Brunei, 3 in Hong Kong, 2 in India, 134 in Indonesia, 2 in Japan, 21 in Mainland China, 59 in Malaysia, 2 in Myanmar, 1 in Philippines, 70 in Singapore, 1 in South Korea, 2 in Taiwan, 152 in Thailand, and 8 in Vietnam), Europe (1 in France, and 1 in United Kingdom), and North America (3 in United States), where they provide a wide range of financial services through their 3 core business segments – Group Retail, Group Wholesale Banking, and Group Global Markets.

Following the conclusion of its financial year ended 31 December 2022 (you can check out my review of the bank’s fourth quarter and full-year results here), UOB have released its annual report yesterday evening (23 March 2023), along with its notice of annual general meeting (AGM.)

For the benefit of those who do not have the time to through the entire report, you’ll find key takeaways of it in this post, together with details about its upcoming AGM:

Summaries from Chairman Wong Kan Seng’s Statement, and Deputy Chairman & CEO Mr Wee Ee Cheong’s Report

Strong Financial Performance:

• Despite the uncertainties, UOB still managed to report a total income of $11.6 billion, along with a record high core net profit of $4.8 billion (even if one-off expenses relating to the acquisition of Citigroup’s Malaysia and Thailand consumer businesses were included, its net profit was also at a record high of $4.6 billion.)
• The resiliency in its results were boosted by a 31% surge in its net interest income to $8.3 billion (driven mainly by loan growth of 3%, and high net interest margin – which expanded 30 basis points to 1.86%), along with a 4% growth in its other non-interest income (driven by its customer-related treasury income.) However, this was offset by a 9% decline in its net fee and commission income, as wealth and fund management fees were impacted by muted investor sentiments amid market volatility.
• Its asset quality remained resilient, with non-performing loans steady at 1.6% as at 31 December 2022. Non-performing assets coverage remains strong at 98% (or 207%) after taking collateral into account. The Group continued to take a prudent approach to maintain performing loan coverage at 1%.
• Post-Citigroup acquisition, UOB’s Common Equity Tier-1 Capital Adequacy Ratio remained strong at 13.3% as at 31 December 2022, well above the Monetary Authority of Singapore’s (MAS) minimum requirement.
• Finally, given the bank’s robust performance, the Board recommends a final dividend of 75 cents, which takes the total dividend for 2022 to $1.35/share (FY2022: $1.20/share.)

Sharpening its Strategic Focus:

• The Board approved the Group’s sharpened purpose (to build capabilities to support 3 key growth drivers in the region, namely connectivity, personalisation, and sustainability), along with a regional brand refresh campaign, which was launched in September called ‘Doing Right By You’ – where initiatives focused on building the future for its customers, colleagues, and community stakeholders across the region.
• To scale up its regional business, the bank acquired Citigroup’s consumer banking businesses in Indonesia, Malaysia, Thailand, and Vietnam, which will double its retail customer base in ASEAN, and accelerate its growth by 5 years, along with turbocharging the bank’s scale in the region and lifting its market position swiftly.
• On people strategies, apart from having flexibility and well-being (to help them realise their full potential in whatever they do) as baseline standards, it has also introduced ‘The UOB Way’ in 2022 to strengthen its people culture and build employee pride. Such initiatives positions the bank well as it charts its next phase of growth.
• Sustainability is also another area of focus for the bank, to which they have achieved carbon neutrality in its operations in 2021. In 2022, they have laid out a comprehensive roadmap to reach Net Zero carbon emissions by 2050. As a start, its plans cover 6 sectors (which make up 60% of its corporate lending portfolio): power, automotive, oil and gas, real estate, construction, and steel.
• In order to help the bank stay abreast of other growth opportunities, the Board paid attention to blockchain and digital asset developments, and supported the management on key digital transformation initiatives, resulting in new services being launched across the region in 2022.

Maintaining a Strong Risk Culture:

• As the pandemic entered a new phase and governments scaled back support measures, the Board and Management monitored the situation closely, paying particular attention to asset quality across the Group.
• At the same time, given the ongoing and emerging economic, political, and environmental uncertainties, the management have conducted regular stress-tests on various scenarios.

An Exciting Southeast Asia:

• 2022 was a year where Covid-19 restrictions have finally been lifted in many parts of the world, but supply chain disruptions and geopolitical tensions drove up food and energy prices – resulting in inflation remaining stubbornly high and central banks around the world raising interest rates at unprecedented speed.
• While global economy is poised to slow down in the year ahead, but Southeast Asia is expected to be more vibrant due to its young population, rising middle class and rapid digitalisation in the region driving demand for goods and services. That said, UOB is in a sweet spot to provide connectivity for customers (due to its business concentration in the region.)

UOB’s Purpose, Ambition, and Key Differentiators:

• For its Wholesale Banking Business, UOB aims to be the number one trade bank in ASEAN, with its strength in connectivity and sector specialisation being key differentiators;
• On the Retail front, UOB wants to be the bank of choice for all aspiring individuals in ASEAN by offering them personalised services and solutions;
• Cutting across all segments, UOB embrace sustainability, embedding Environmental, Social, and Governance (ESG) initiatives in everything they do, focusing on delivering real impact for their customers, stakeholders, and colleagues;
• UOB wants employee pride to be the bank’s most important differentiator, by building upon its value-based culture to help people to flourish.

Game-Changing Acquisition:

• 2022 as a milestone year for UOB, where they acquired Citigroup’s consumer banking businesses (which are proven to be robust) in 4 ASEAN markets – Indonesia, Malaysia, Thailand, and Vietnam. The move will help the bank diversify earnings across products and countries while creating cross-sell opportunities.
• Deal was funded with capital buffers set aside over the years. Timing was opportune as it allowed UOB to ride on the momentum as market reopen (post-pandemic.)

Supporting Customers to Seize Regional Opportunities:

• UOB’s wholesale banking teams have supported many clients to help them reconfigure their supply chains to reshape and to onshore their businesses.
• The bank’s sector specialisation and ground expertise also enables it to support customers in their transition in the face of a stronger sustainability push across the supply chain.
• Its investments in capabilities to support clients in doing cross-border business and expanding to new markets resulted in its cross-border income growing by 12% in 2022 (accounting for about one-third of its Wholesale Banking income.) Transaction banking businesses have also expanded significantly as it contributed 35% towards its Wholesale Banking income. UOB have set sights to become the number one cross-border trade bank in ASEAN.
• In 2022, UOB have combined its Private Bank and Privilege Reserve businesses to create a Private Wealth Group. Despite challenging market conditions, the bank still managed to attract net inflows of more than $8 billion.

Providing Customers with Digital Solutions to Grow:

• UOB have invested heavily on its digital banking platforms to support their customers. In August 2022, UOB TMRW hit a milestone of having digitally acquired one million retail customers since launch.
• For small business clients, the bank had launched an industry first banking app called ‘UOB SME’ between August and November 2022 in Singapore, Malaysia, and Vietnam, to allow its clients to transact on-the-go securely, along with analysing their cashflow via a comprehensive dashboard in the app and tap data-driven insights. Within the first 3 months of the launch, 55,800 clients had started to use the app, with continued momentum expected through 2023 and beyond.
• In 2022, UOB also extended UOB Infinity (a powerful digital banking platform supporting cash management transactions, digital payments, and trade tools) to the bank’s corporate clients in 8 markets (and the bank is aiming to complete the roll-out to another 2 more markets in 2023.)

Details of UOB’s 81st Annual General Meeting

When? Friday, 21 April 2023
Time? 3.00pm
Venue? Pan Pacific Singapore, Pacific 1-3, Level 1, 7 Raffles Boulevard, Marina Square, Singapore 039595

From my understanding in the bank’s Notice of AGM, shareholders have the option of attending the meeting in-person, as well as online – I wanted to opt for the latter, but there are no links for me to pre-register. Calls made to the Investors Relation ended up being answered by a general hotline staff and I was asked to send an email to UOBAGM2023@boardroomlimited.com to indicate my interest to attend (which I have already done so and I currently await their response.)

Related Documents

• Annual Report
• Notice of AGM
• Letter to Shareholders
• Proxy Form
• Additional Information on Directors Seeking Re-Election
• Frequently Asked Questions about the AGM

Disclaimer: At the time of writing, I am a shareholder of United Overseas Bank Limited.

Welcome back to the 3rd part of the ‘Ready to REITire’ video series done in collaboration with The Joyful Investors.

For those of you who are seeing this for the first time, this 5-part video series was done with the purpose of educating fellow investors who are new to investing everything they need to know to start investing in REITs and generate a steady stream of income for themselves.

The first part of the video talks about what a REIT is, advantages of investing in one, and its limitations, and you can check it out here; the second part of the video talks about 3 things we look at before deciding whether a REIT is worthy of a place in our investment portfolio, and you can check it out here.

Moving on, in the next video, Hazelle and myself will be sharing with you 3 potential ‘red flags’ you need to make sure the REITs you have selected are free of before you go ahead and invest in them:

** if you are unable to watch the video above, you can click here to watch it on YouTube.

With the Federal Reserve announcing another 0.25% of interest rate hikes during the FOMC yesterday, the Fed funds rate is now at 4.75% – 5.0% (which is the highest since October 2007 – and we know what happened then, with financial crisis eventually breaking out.)

Will history repeat itself this time round? Your guess is as good as mine.

That said, it becomes all the more important for you to invest in fundamentally sound companies – no doubt IF a financial crisis happens, the share prices of all companies will plunge, but when the economy gradually recovers, the prices of these fundamentally sound companies will be among the first to see their share prices shoot up.

In this post, I’ll be sharing with you 7 fundamentally sound REITs with a distribution payout of 5.0% and above (based on their closing prices yesterday [22 March 2023], along with the REIT’s latest full year distribution payout) – no doubt at 5.0%, it is still unable to beat the current inflation rate in Singapore (at 6.3% in February 2023 announced today, source here) but it beats leaving your money in the bank, where the interest is miserable (I’m not talking about Multiplier accounts here.) Also, at a distribution yield of at least 5.0%, it beats the interest rate of 4.0% in the CPF Special Account:

1. CapitaLand Ascendas REIT (SGX:A17U)

CapitaLand Ascendas REIT (previously known as just Ascendas REIT) is Singapore’s first and largest listed business space and industrial REIT. Currently, it has 227 properties across 3 segments: Business Space and Life Sciences, Logistics, and Data Centres in developed markets of Singapore, the United States, Australia, and in the United Kingdom/Europe.

In the last 5 years (between FY2018 and FY2022 – the REIT has a financial year end every 31 December), its gross revenue and net property income have saw a steady growth – with the former growing from $886.2m in FY2018 to $1,352.7m in FY2022, and the latter growing from $485.7m in FY2018 to $663.9m in FY2022.

As at 31 December 2022, the REIT has a portfolio occupancy of 94.6%, and its debt profile is also healthy with its aggregate leverage at 36.3% (a good distance away from the regulatory level of 50.0%.)

Finally, based on its closing price of $2.81 yesterday, and a distribution payout of 15.795 cents/unit in FY2022, it represents a distribution yield of 5.6%.

2. CapitaLand Integrated Commercial Trust (SGX:C38U)

CapitaLand Integrated Commercial Trust, or CICT for short, is the first and largest REIT listed in the Singapore Exchange. Its portfolio comprises of 21 properties (located in Singapore, Germany, and Australia) used for commercial (retail and/or office) purposes.

Over the last 5 years (between FY2018 and FY2022 – the REIT has a financial year end every 31 December), its gross revenue and net property income have also grown at a stable pace – with the former going up from $697.5m in FY2018 to $1,441.7m in FY2022, while the latter improved from $493.5m in FY2018 to $1,043.3m in FY2022.

As at 31 December 2022, the REIT’s occupancy rates for its retail, office, and integrated properties are all above 90% – at 98.3%, 94.4%, and 97.1% respectively. Also, its aggregate leverage, at 40.4%, remains healthy.

Finally, based on its closing price of $1.92 yesterday, and a distribution payout of 10.58 cents/unit in FY2022, it represents a distribution yield of 5.5%.

3. Frasers Centrepoint Trust (SGX:J69U)

Frasers Centrepoint Trust is a pure-play suburban REIT, with all of its properties (comprising of 9 retail malls, and 1 office building) located in the various heartland locations in Singapore. Among all the 7 REITs, this is the only REIT with all of its properties located in Singapore.

The REIT’s financial performance over the last 5 years (between FY2017/18 and FY2021/22 – it has a financial year end every 30 September) has remained stable – with its gross revenue growing from $193.3m in FY2017/18 to $356.9m in FY2021/22, and its net property income improving from $137.2m in FY2017/18 to $258.6m in FY2021/22.

Both its occupancy rate as well as its debt profile as at 31 December 2022 is at very healthy levels – with the former at 98.4%, and the latter at 33.9% (which is a very conservative level.)

Finally, based on its closing price of $2.22 yesterday, and a distribution payout of 12.27 cents/unit in FY2021/22, it represents a distribution yield of 5.5%.

4. Keppel DC REIT (SGX:AJBU)

Keppel DC REIT is Singapore’s first pure-play data centre REIT in Asia, with its portfolio comprising of 23 data centres across 9 countries (Singapore, Australia, China, Malaysia, Ireland, Germany, Netherlands, United Kingdom, and Italy.)

In the last 5 years (between FY2018 and FY2022 – the REIT has a financial year ending every 31 December), both its gross revenue and net property income saw stable growths – with the former improving from $175.5m in FY0218 to $277.3m in FY022, and the latter climbing from $157.7m in FY2018 to $252.5m in FY2022.

As at 31 December 2022, the REIT’s portfolio occupancy is at a resilient level of 98.5%, and aggregate leverage at 36.4% (at this level, there’s still a good headroom before the regulatory level of 50.0% is reached.)

Finally, based on its closing price of $2.05 yesterday, and a distribution payout of 10.214 cents/unit in FY2022, it represents a distribution yield of 5.0%.

5. Mapletree Pan Asia Commercial Trust (SGX:N2IU)

Formed as a result os a merger between Mapletree Commercial Trust (where all of its commercial properties are located in Singapore), and Mapletree Pan Asia Commercial Trust (where all of its commercial properties are located in key gateway markets of Asia) in August 2022, its portfolio currently comprises 18 properties located in a total of 5 countries – Singapore, Hong Kong, China, Japan, and South Korea.

Looking at the REIT’s financial performances over the last 5 years (between FY2017/18 and FY2021/22 – it has a financial year ending every 31 March; do take note that the REIT’s latest year’s financial performance was before the completion of the merger and hence contributions from the newly added properties from Mapletree North Asia Commercial Trust’s properties were not included), it has risen stably – with its gross revenue growing from $433.5m in FY2017/18 to $499.5m in FY2021/22, and its net property income going up from $338.8m in FY2017/18 to $388.7m in FY2021/22.

In terms of its portfolio occupancy, as well as its debt profile as at 31 December 2022, they are at very healthy levels – with the former at 95.5%, and the latter at 40.2% (which is still a good distance before the regulatory level of 50.0% is reached.)

Finally, based on its closing price of $1.77 yesterday, and a distribution payout of 9.53 cents/unit in FY2021/22, it represents a distribution yield of 5.4%.

6. Mapletree Industrial Trust (SGX:ME8U)

Mapletree Industrial Trust invests in properties used for industrial, as well as for data centre purposes. Its portfolio currently comprises 85 properties in Singapore, along with 56 properties in North America (including 13 data centres held through the joint venture with Mapletree Investments Pte Ltd.)

Over the last 5 years (between FY2017/18 and FY2021/22 – the REIT has a financial year ending every 31 March), both its gross revenue and net property income have grown at a stable pace – with the former improving from $363.2m in FY2017/18 to $610.1m in FY2021/22, and the latter climbing from $277.6m in FY2017/18 to $472.0m in FY2021/22.

Looking at the REIT’s portfolio occupancy and debt profile, as at 31 December 2022, its portfolio occupancy is at a very strong rate of 95.7%, and its aggregate leverage remains at a healthy level of 37.2%.

Finally, based on its closing price of $2.34 yesterday, and a distribution payout of 13.80 cents/unit in FY2021/22, it represents a distribution yield of 5.9%.

7. Mapletree Logistics Trust (SGX:M44U)

Mapletree Logistics Trust is the first Asia-focused logistics REIT listed on the Singapore Exchange. Its portfolio currently comprises of 186 properties located in Singapore, Australia, China, Hong Kong, India, Japan, Malaysia, South Korea, and Vietnam.

In terms of its financial performances over the last 5 years (between FY2017/18 and FY2021/22 – the REIT has a financial year ending every 31 March), both its gross revenue and net property income have grown at a steady pace – with the former improving from $395.2m in FY2017/18 to $678.6m in FY2021/22, and the latter going up from $333.8m in FY2017/18 to $592.1m in FY2021/22.

As at 31 December 2022, the REIT’s portfolio occupancy is at a high of 96.9%, and its aggregate leverage remains at a very healthy level of 37.4%.

Finally, based on its closing price of $1.69 yesterday, and a distribution payout of 8.787 cents/unit in FY2021/22, it represents a distribution yield of 5.2%.

Closing Thoughts

Looking at the 7 REITs above, I’m sure you can agree with me that they are fundamentally sound – with their financial performances over the last 5 years growing at a stable pace, portfolio occupancy at above 90%, and finally, a very healthy aggregate leverage (at 40.0% or below.)

Despite having said that, this post is by no means any recommendation for you to go out there and buy all 7 REITs. You should always do your own due diligence to first study about the individual REITs and make sure you understand them well enough prior to investing your hard-earned money into them – if you are new to REIT investing, not to worry, as you can check out this 5-part video series created in collaboration with The Joyful Investors titled ‘Ready to REITire’, where we will be showing you the essentials to get started. At the time of writing of this post, 2 parts have already been published, and you can check them out here – part 1 (introduction to S-REITs, why you should invest in them, and limitations), part 2 (3 things to look at to determine whether a REIT deserves a place in your ‘shopping list’.)

As always, I hope you’ve found this post useful, and if you have any questions, feel free to let me know here.

Disclaimer: At the time of writing, I am a unitholder of all 7 REITs above.

From an initial portfolio of just 3 retail properties (in Funan, Junction 8, and Tampines Mall) when it was listed back in July 2022, CapitaLand Integrated Commercial Trust’s (SGX:C38U) portfolio now comprises a total of 26 retail, office, and integrated development properties in 3 different countries (Singapore, Germany, and Australia.) The REIT is also a constituent of Singapore’s benchmark Straits Times Index (STI) since September 2008.

Following the conclusion of its financial year on 31 December 2022 (you can read my review of its Q4 and FY2022 results here), the REIT have made available its annual report, along with its novice of annual general meeting (AGM) early this morning (22 March 2023.)

In today’s post, you’ll find key highlights to take note of in its annual report, details about its upcoming AGM, as well as an EGM conducted after the conclusion of its AGM on the very same day to seek unitholders’ approval for the REIT’s entry into the ‘New Singapore Property Management Agreement’ (more details below):

Message to Unitholders

Delivering Growth Amid Headwinds:

• Despite headwinds posed by geopolitical tensions, high energy prices, and inflation, CapitaLand Integrated Commercial Trust (or CICT for short) continued to deliver growth in its distributable income, where it went up by 4.1% to S$702.4m (FY2021: S$674.7m), as a result of higher contribution from the enlarged portfolio, and better performance from existing properties. However, the REIT had retained distribution income of S$7.9m and S$2.7m received from CapitaLand China Trust and Sentral REIT respectively for general corporate and working capital purposes. Distribution Per Unit was up by 1.7% to 10.58 cents (FY2021: 10.40 cents.)
• Gross revenue climbed by 10.5% to S$1,441.7m (FY2021: S$1,305.1m), and net property income surpassed the S$1 billion mark for the first time, growing by 9.7% to S$1,043.3m (FY2021: S$951.1m), due to contributions from the REIT’s new acquisitions (which includes 66 Goulburn Street, 100 Arthur Street, a 50.0% interest in 101-103 Miller Street and Greenwood Plaza in Sydney, Australia, and a 70.0% interest in CapitaSky), higher revenue from gross rental income and gross turnover rent. However, this was partly offset by higher energy cost, as the energy tariff rate was almost double that of FY2021.

Maintaining a Healthy Balance Sheet:

• Underpinned by the REIT’s proactive capital management strategy, it continued to enjoy access to diversified funding sources and maintain a well-spread debt maturity profile of 3.9 years, with the longest tenor debt maturing in 2033.
• During FY2022, it managed to secure a total of S$2.7 billion of sustainability-linked/green loan facilities, including the issuance of HK$900m 9-year fixed rate notes to finance or refinance, in whole or in part, eligible green projects undertaken by CICT in accordance with the CICT Green Finance Framework.
• Aggregate leverage ratio was at 40.4% as at 31 December 2022 (compared to 37.2% as at 31 December 2021), with interest coverage remaining healthy at 3.7 times. 81% of total borrowings have been hedged to fixed rates to mitigate potential risks from interest rate hikes.

Singapore Retail Takes a New Glow:

• Shopper traffic climbed 25.0% year-on-year (y-o-y) in FY2022, boosted by a strong recovery of traffic in the REIT’s downtown malls since Q3 FY2022.
• Riding on the positive momentum of Singapore’s reopening, the REIT unveiled new retail and lifestyle openings at its downtown malls, including Bugis Junction, Bugis+, Funan, and Raffles City Singapore, in June 2022 to attract shoppers and tourists. This is in addition to leveraging on CapitaStar, the main digital enabler of CapitaLand’s holistic retail ecosystem, to delight shoppers and drive more sales to its tenants.
• Rental reversion of its retail portfolio for FY2022 was +1.2%, compared to -3.2% in FY2021, with encouraging recovery seen at suburban and downtown malls, with the weighted average lease expiry (or WALE) as at 31 December 2022 was stable at 2.2 years.
• Occupancy of the REIT’s retail portfolio as at 31 December 2022 improved by 1.5 percentage points (pp) to 98.3%, higher than the Urban Redevelopment Authority’s (URA) retail occupancy rate of 92.9%. The occupancy rate of its integrated development portfolio held steady at 97.1% for the same period.

Singapore Office Segment Rebounds:

• Office demand in Singapore was robust (due to the country’s position as a resilient financial hub), with the committed occupancy of its Singapore office portfolio rising by 5.8pp y-o-y to 96.2%, above CBRE’s Singapore Core CBD market occupancy of 94.7%
• During the post-pandemic recovery phase in FY2022, tenants had the options to consider flexible workspaces for remote working, business continuity planning, and split team arrangements – these include managed or leased flexible workspaces within the REIT’s portfolio. This helped the REIT to maintain a stable performance in the Singapore office market in 2022, where it achieved a tenant retention rate of 81.1%, with a healthy WALE at 3.8%.

Proactive Management of the REIT’s Overseas Portfolio:

• To enhance value of the REIT’s overseas assets, it focused on optimising the properties through proactive lease management to ramp up occupancies and providing fitted-out workspace to target different segments of the market.
• Specifically, for its newly acquired portfolio in Australia, comprising 66 Goulburn Street, 100 Arthur Street, and 101-103 Goulburn Street, the REIT is also exploring flexible workspace solutions in-line with its office strategy.
• For Gallileo in Frankfurt, Germany, its anchor tenant, Commerzbank has given notice to end its lease in January 2024 – while the REIT is actively leasing the upcoming vacant space and evaluating possible asset enhancement initiative (AEI) works, this will take time. Hence, this property is expected to be non-income generating for at least 18 months.

Seizing Properties, and Strengthening its Position:

• With Singapore being CICT’s core market, it is continuing to explore opportunities to strengthen its position:
  • On 27 April 2022, it partnered with CapitaLand Open End Real Estate Fund (COREF) to acquire a 70.0% interest in CapitaSky, a quality Grade A office building in the Central Business District, for an agreed property value of S$1,260.0m, where it was partially funded by the sale proceeds from the divestment of JCube.
  • With the acquisition of CapitaSky, and together with Capital Tower, CICT now holds a dominant position in Singapore’s Tanjong Nagar office sub-market with more than 1.2m sq ft of NLA (Net Lettable Area.)
  • On the retail side of things, in FY2022, opportunities for AEI were also identified and embarked at Raffles City Singapore (where works began in January 2022 and completed in Q4 FY2022 to reconfigure and reposition 111,000 sq ft of space previously occupied by an anchor tenant across levels 1 to 3 to create smaller units to cater to large format and specialty retail brands, along with a new set of escalators added to provide greater convenience to shoppers) and CQ @ Clarke Quay (works began in Q3 FY2022 to transform it into a day-and-night destination, and is slated to complete by Q3 FY2023; the retail property continues to remain open as works are being carried out in phases.)

Growing Responsibly:

• The REIT’s Sponsor, CapitaLand Investment Limited, has announced its commitment to achieve Net Zero emissions by 2050, building on its 2030 Sustainability Master Plan (SMP), and CICT is aligned with this vision.
• Efforts taken by the REIT to reduce carbon footprint in its properties include the buying of green energy for use in its properties, and installing of renewable energy facilities onsite at more properties – one of them being the installation of solar panels in IMM Building in Singapore in 2 phases to generate renewable energy (with the first phase expected to be operational by April 2023, and the second phase by 1H FY2023.)
• At the end of FY2022, about 30% of the REIT’s total borrowings comprised of sustainability-linked/green loan facilities and green bond issuance.
• The REIT’s efforts in sustainability have garnered them a 5-Star Rating and an ‘A’ for Public Disclosure in GRESB 2022. CICT is also rated ‘AA’ by MSCI ESG and ‘Low Risk’ by Sustainalytics.

Outlook:

• In light of macroeconomic uncertainty amid rising interest rates, inflation, and geopolitical tensions, the REIT’s strategy to navigate through the challenges include maintaining longer debt matures, with a high proportion of fixed rate debt while remaining vigilant against interest rate movements to time its refinancing appropriately.
• The REIT expect energy prices to remain high in 2023, and as such, they have hedged their energy tariff rate to avoid further volatility in energy costs for 2023 and 2024. This is on top of measures taken to keep its properties energy efficient while increasing the use of green energy as much as possible.
• Finally, Singapore will continue to be the REIT’s most important market for expansion and growth. At the same time, they will be patient for the right opportunities to deepen their presence in the existing overseas market.

Conversations with CICT’s CEO Mr Tony Tan

Opportunities and Threats in the Office & Retail Segments:

Retail Segment:

• Downtown malls have recovered well, with the increase in domestic consumption and return of tourists. Demand for atrium space also rose as tenants launched campaigns to woo shoppers.
• To keep up with the times, the REIT have consistently optimised tenant mix to curate offering that excite shoppers (examples include AEI works at Raffles City Singapore, and CQ @ Clarke Quay.) This is on top of the use of its loyalty programme CapitaStar, which has enabled the REIT to acquire new retailers and retain existing ones as they drive omnichannel activations on the platform.

Office Segment:

• To cater to the tenants’ evolving needs, the REIT have adopted a core and flex strategy for their office business – one of them being its focus on managing flexible workspaces by partnering with The Work Project at CapitaSpring, and Six Battery Road, while taking on leased models with flex space tenants such as JutCo at Asia Square Tower 2 and WeWork at 21 Collyer Quay.

How is CICT Mitigating the Impact of Inflation and Rising Interest Rates:

Mitigating Impact on Inflation:

• The REIT is coping with rising costs by encouraging the reduction of energy and water consumption, along with being prudent with less urgent expenses.
• Other measures taken include the leveraging on economies of scale across CapitaLand’s Singapore portfolio through bulk tender, installing smart building features, and integrating automation initiatives.

Mitigating Impact on Rising Interest Rates:

• The REIT has maintained a relatively high fixed-rate ratio (where the management is comfortable of 70-80% of borrowings on fixed rates) and a debt maturity profile that is well spread out.

Growth Opportunities that CICT is Eyeing:

• Organic Growth: There are asset plans in place to drive net property income over time.
• Inorganic Growth: The REIT’s management is adopting a disciplined and prudent approach, taking into consideration the prevailing market conditions – each acquisition must satisfy key criteria such as yield accretion, rental sustainability, potential for value creation over time, and whether the assets fulfil, or have the potential to fulfil its ESG objectives.
• Portfolio will predominantly be Singapore-focused, covering office, retail, and integrated developments. At the same time, the REIT’s management will look overseas in developed markets for investment opportunities for diversification, and where possible, deepen the REIT’s presence in existing markets they are already in (Germany and Australia.)
• Key objective is to deliver stable and sustainable returns to unitholders, while remaining committed to ESG requirements that underpin the REIT’s business.

CICT’s ESG Focus in 2023, and Plans to Achieve the Organisation’s 2050 Net Zero Target:

• To progress towards the targets, the REIT is exploring green energy procurement, along with leveraging technology to enhance efficiency, such as initiating pilot programmes through the CapitaLand Sustainability X Challenge.
• The REIT is also looking to achieve a 100% green-rated portfolio for its operational properties by 2030. For new investments, the green rating of each property will be an evaluation criterion.
• Lastly, they have established a Green Finance Framework in February 2022 to allocate and manage green financing raised for projects which will deliver environmental benefits that supports the REIT’s objectives.

Details of CapitaLand Integrated Commercial Trust’s Upcoming AGM

The following are details about its upcoming AGM:

When? Wednesday, 19 April 2023
Time: 2.30pm
Where? Padang & Collyer Ballroom, Level 4, Raffles City Convention Centre, 80 Bras Basah Road Singapore 189560

Also, do note that on the very same day (at 4.30pm, immediately following its AGM), they will be conducting an EGM to seek unitholders approval on the proposed entry into the ‘New Singapore Property Management’ (which will cover CICT’s existing properties located in Singapore, and properties acquired in Singapore from time-to-time during the entire term of the agreement – which lasts for 10 years starting from 01 June 2023), following the merger and formation of CICT in 2020, for the following purposes:

• Cost savings with improved efficiency in manpower and refinement towards a performance-based fee structure (from a fixed cost structure and reimbursement of Lease Market Staff cost previously – the proposed change will lead to overall net savings to CICT as such fees are only payable upon entry into licenses or tenancies);
• Proven track record and experience of the Singapore Property Managers;
• Inclusion of new clauses in the New Singapore Property Management Agreement to protect the interests of CICT, including key performance indicators to have a more robust process to review and track the performance of the Singapore Property Managers, along with the requirement for the Singapore Property Managers to abide by the ESG clauses, and use all commercially viable and reasonable efforts to further the ESG and sustainability practices, priorities, targets and goals from time to time as set out by the Manager.

You have the option to attend the meeting physically (if your units are in a custodian account, then you’ll need to inform your brokerage about your intention to attend, and it will register for you to attend as a proxy), or virtually, where you can sign up here (do make sure you sign up by Monday, 17 April 2023 if you want to attend the meeting virtually.)

Do note that both meetings will be held physically, with no options for unitholders to attend virtually. For unitholders who has units in your CDP account, you can just attend the meeting (where your unitholding will be verified on the spot.) However, if your units are in a custodian account, then you’ll need to inform your brokerage about your intention to attend, and it will register for you to attend as a proxy.

Related Documents

• Annual Report
• Letter to Unitholders

AGM:

• Notice of AGM
• Proxy Form for AGM
• Arrangements for AGM

EGM:

• Notice of EGM
• Proxy Form for EGM
• Circular (for EGM)
• Arrangements for EGM

Disclaimer: At the time of writing, I am a unitholder of CapitaLand Integrated Commercial Trust.

‘Ready to REITire’ is a 5-part video series that is done in collaboration with The Joyful Investors, where our aim is to give those who are new to investing the basics about investing in REITs to generate a steady stream of income through distributions (which is the same as ‘dividends’, but as far as REITs are concerned, they are termed as ‘distributions’.)

In the first part of the video series (for those of you who have missed out, you can check it out here), Hazelle (from The Joyful Investors) and myself shared about what exactly a REIT is, along with some of the advantages of investing in one, and also its limitations.

As I’ve mentioned in my previous post, there are about 40 REITs listed on the Singapore Exchange, and some REITs better than others. So, how do you go about selecting which REITs to invest in?

In today’s video, you’ll learn about 3 things we look at to help us determine whether the REIT is worthy of a place in our investment portfolio:

** if you are unable to watch the video above, you can click here to watch it on YouTube.

I sincerely hope you’ve found the contents in this video easy to understand.

In the next part of the video series, we will be sharing with you how you can detect potential ‘red flags’ in a REIT – please do not skip this video, because simply by applying what we’re going to share with you within will help to significantly reduce the risk of you making a bad investment decision. Stay tuned!

For those who have been following The Singaporean Investor on Instagram (if you have not, you can do so here to receive exclusive contents), or on InvestingNote (an investing community where like-minded individuals get together to share their experiences about investing and trading, and you can follow me on the forum here) you are probably aware of a collaboration between The Joyful Investors (https://www.thejoyfulinvestors.com) and myself to do a video series about REITs.

The reason why we embarked on doing this video series (titled ‘Ready to REITire’) is to educate fellow Singaporeans who are new to investing the essentials about REIT investing, which is a very popular investment option out there that provides a regular stream of income (through distributions – also known as dividends, but in REITs, they are known as such) to unitholders (also known as shareholders, but in REITs, they are referred to as such.)

In the first of this 5-part video series, you will learn about what a REIT is, some of the advantages of investing in one, along with its limitations (every investment option have their fair share of limitations, and REITs are no different):

** if you are unable to watch the video above, you can click here to watch it on YouTube.

Especially for those who are new to investing, I hope that after watching the above video, you now have a better understanding about REITs in general.

In the next video, Hazelle and myself will be sharing with you 3 things we look at when it comes to selecting a REIT to invest – to date, there are about 40 REITs listed on the Singapore Exchange, and we’ll be teaching you how to separate the wheat from the chaff.

Till then, if you have any questions, comments, and/or suggestions, you can reach out to me by sending me a message here.

You can also get in touch with The Joyful Investors via the following channels: Telegram, Facebook, and Instagram.