Following the conclusion of financial year 2021, and the release of its full-year results on 28 January 2022 (which I have written a summary on, and you can read it here), blue-chip REIT in CapitaLand Integrated Commercial Trust (SGX:C38U), or CICT for short, released its latest annual report, along with its notice of annual general meeting (AGM) this morning (22 March 2022.)

In this post, you’ll find my summary of the most important points in this report to take note of (which I’m sharing for the benefit of those who do not have the time to go through it), along with details about its upcoming AGM:

Performance Highlights:

• Gross revenue skyrocketed 75.1% to $1.305.1m (FY2020: $745.2m) buoyed by an enlarged portfolio, comprising office properties and 100% contribution from Raffles City Singapore (following the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust.)
• Net property income, and distributable income to unitholders soared by 85.5% and 82.7% to $951.1m (FY2020: $512.7m) and $674.7m (FY2020: $369.4m) respectively due to full-year contributions from properties of CapitaLand Commercial Trust following the merger (in October 2020), and lower interest expenses.
• Distribution Per Unit climbed 19.7% to 10.40 cents (FY2020: 8.69 cents.)
• Gearing ratio (as at 31 December 2021) is at 37.2% (FY2020: 40.6%), with 83% of the REIT’s total borrowings are on a fixed rate – this mitigates the potential impact from a higher interest rate environment. Also, their average cost of debt was 2.3% per annum as at the end of FY2021 (an improvement from 2.8% a year ago.)
• The REIT’s efforts in addressing tenants’ space requirements and specific needs resulted in its portfolio occupancy remaining healthy at 93.9% as at 31 December 2021, with tenant retention for their retail and office portfolios at 82.3% and 69.3% respectively. Weighted average lease expiry was at 3.2 years, with 26.5% of the leases (18.2% retail, and 8.3% office) due for renewal in 2022 (the management updated that lease renewals with 2 major tenants, which constituted 3.4% of the leases due for renewal in 2022, has been completed in January 2022, and that they are proactively working on the balance 23.1% of the leases due for renewal in the remaining months of the year.)

Performance of CICT’s Office and Retail Properties:

• Since Q2 FY2021, Singapore office market rents have continued to increase, with new office leases and renewals signed at above market rents (but below the respective expiring rents in 2021.)
• Retail rental reversions have also improved during the year, although downtown malls were more impacted by negative reversions than their suburban counterparts. Monthly average shopper traffic at the REIT’s malls for FY2021 was consistent with that for FY2020, even though it was just 61.2% of the monthly average when compared against FY2019. Retail tenant sales per square foot for FY2021 was also on par with FY2020, and at 87.8% of FY2019’s monthly average.

Update on Asset Enhancement Initiative (AEI) Works:

• Lot One Shopper’s Mall unveiled a new cinema and a sustainability-focused library (it is the first local public library in Singapore with an indoor garden, along with a hydroponics showcase) in the second half of 2021.
• Six Battery Road received a new through-block link flanked by Standard Chartered’s new banking hall (it opened its doors on 22 June 2021) with assisted and self-help services, and upcoming retail offerings, which office workers at the property can look forward to in the first half of 2022.
• 21 Collier Quay has been handed over to WeWork for their own fit-out works, and it will begin offering enterprise solutions and co-working options at the office building from Q3 FY2022.
• CapitaSpring obtained a Temporary Occupation Permit (TOP) for the whole development in November 2021 – as at 9 February 2022, the property have achieved 93% committed occupancy, with 14 tenants having started operations, and more are in the midst of fitting out the premises.
• Raffles City Singapore is currently undergoing AEI (since January 2022), where the rejuvenation of the ex-anchor tenanted area will see the reconfiguration of 111,000 sq ft from Levels 1 to 3 into smaller units for large format and specialty retail. Works are scheduled to complete in Q4 FY2022.

Portfolio Reconstitution Activities:

• Divested 50.0% interest in One George Street in Q4 FY2021 at an exit yield of 3.17% per annum, with the capital recycled to partially finance 3 higher yielding assets in Sydney, Australia (66 Goulburn Street, 100 Arthur Street, and a 50.0% interest in 101 – 103 Miller Street and Greenwood Plaza), at a combined Net Property Income (NPI) yield of 5.1% – this marks CICT’s first inroad into Sydney, Australia.
• Divested JCube for S$340.0m at an NPI yield of less than 4% on 24 January 2022, in-line with their portfolio reconstitution strategy of divesting non-core assets, while maintaining a strong foothold in Jurong Gateway with their 2 other malls (in Westgate and IMM Building.)

Sustainability Efforts:

• CICT’s environmental commitments are aligned with CapitaLand’s 2030 Sustainability Master Plan.
• The REIT’s sustainability efforts have earned them a GRESB 5-star rating and an ‘A’ for Public Disclosure in 2021. Also, a majority of their Singapore portfolio leases contain green clauses and green fit-out guides are given to all its tenants for reference when fitting out their spaces.
• Following the REIT’s increased focus on climate-change risks and management measures, they have an interim update on the Task Force on Climate-related Financial Disclosures (TFCD) framework – which they are currently working on providing more disclosures.

Outlook Ahead:

• Management remains cautiously optimistic on the reopening theme. They also expect rising retail and office market rents in Singapore to be supported by the limited gross new completions in the next 3 years.
• This is on top of the progressive lifting of border restrictions, along with more Vaccinated Travel Lanes (VTLs) being opened (and an increase in tourist numbers), as well as more employees returning to office – all of them bodes well for CICT (particularly in shopper traffic at its downtown malls.)
• The REIT will continue to optimise their portfolio and explore potential AEIs – it updated that plans are already underway for a repositioning of Clarke Quay; On top of that, they are also seeking opportunities to strengthen their position in their home market Singapore, along with deepening their presence in Germany and Australia.

Details of Upcoming AGM & Dialogue Session by SIAS

AGM Details:

CICT will be holding its AGM on Tuesday, 19 April 2022, at 2.30pm. Due to the current safe management measures in place, unitholders can only attend the meeting online.

If you are a unitholder of the REIT, and would like to attend the e-AGM, you can sign up, along with submitting any questions you may have for the management here (do take note that the deadline to do so will be on Tuesday, 19 April 2022, at 5.00pm.)

I have already registered to attend the meeting and as usual, I will provide a summary of it in due course.

SIAS-CICT Unitholder Engagement:

Additionally, SIAS is also holding a unitholder engagement with CICT’s management (attended by CEO Mr Tony Tan, and CFO Ms Wong Mei Lian) on Tuesday, 12 April 2022 between 12.30pm and 1.30pm. If you are a unitholder of the REIT and would like to attend the event, you can sign up here.

Related Documents:

• Annual Report
• Letter to Unitholders
• Notice of AGM
• Proxy Form

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