CapitaLand Integrated Commercial Trust (SGX:C38U), or CICT for short, is Singapore’s first and largest REIT listed on the Singapore Exchange. Early this morning (01 February 2023), the REIT have made available its results for the fourth quarter, and for the full-year ended 31 December 2022 (i.e. FY2022.)

If you are unfamiliar with the REIT, here’s a quick introduction – it is predominately Singapore-based (with 21 properties in its portfolio located in the country, and the remaining 5 properties located in Frankfurt, Germany [2], as well as in Sydney, Australia [3].) In terms of property types, they are for retail (e.g. Bugis Junction, Bugis+, IMM, and Plaza Singapura) and/or office (e.g. Asia Square Tower 2, CapitaGreen, CapitaSky) purposes. Additionally, the REIT is a constituent of Singapore’s benchmark Straits Times Index (STI.)

In this post, you’ll read about my review of the blue-chip retail and office REIT’s latest financial performance, portfolio occupancy and debt profile, as well as distribution payouts to unitholders.

Let’s begin:

Financial Performance (FY2021 vs. FY2022, and Q4 FY2021 vs. Q4 FY2022)

In this section, you’ll find the REIT’s financial performance first on a year-on-year (y-o-y) basis (i.e. FY2021 vs. FY2022), and then on a quarter-on-quarter (q-o-q) basis (i.e. Q4 FY2021 vs. Q4 FY2022) which I have computed based on the figures in the previous quarters:

FY2021 vs. FY2022:

My Observations: The 10.5% improvement in CICT’s gross revenue was due to contributions from the enlarged portfolio following the acquisitions (of 77 Goulburn Street, 100 Arthur Street, 50.0% interest in 101-103 Miller Street, and Greenwood Plaza in Sydney, Australia, as well as CapitaSky in Singapore), higher occupancy and rental rates achieved, along with higher rental on gross turnover.

However, due to a 12.6% increase in property operating expenses (which can be attributed to the newly acquired properties, higher utility rates, along with marketing expenses), its net property income saw a smaller percentage of improvement (at 9.7%.)

Q4 FY2021 vs. Q4 FY2022:

My Observations: On a q-o-q basis, I’m encouraged by the REIT’s double-digit percentage growth, which can be attributed to contributions from the newly acquired properties in Sydney, Australia, as well as CapitaSky in Singapore, higher occupancy and rental rates achieved, as well as higher rental on gross turnover.

Portfolio Occupancy Profile (Q3 FY2022 vs. Q4 FY2022)

Moving on, let us take a look at CICT’s portfolio occupancy profile, broken down by the different property types (retail, office, and integrated development) – you’ll find a comparison of the figures reported for the current quarter under review (i.e. Q4 FY2022 ended 31 December 2022) against that reported in the previous quarter 3 months ago (i.e. Q3 FY2022 ended 30 September 2022):

My Observations: On the whole, I felt CICT’s portfolio occupancy continues to be very resilient – with improvements seen in the occupancy rates in its retail and office properties – for the former, all of its retail malls saw higher occupancy rates except for Junction 8 (from 99.9% in Q3 to 99.8% in Q4), Funan (from 96.2% in Q3 to 96.1 in Q4), and Raffles City Singapore (from 97.1% in Q3 to 91.0% in Q4 – due to AEI works in the period under review). Also, all of its malls had occupancy rates above 90.0%; for the latter, apart from Asia Square Tower 2 (from 99.5% in Q3 to 98.0% in Q4), all of its office properties saw higher occupancy rates.

Only the REIT’s integrated development properties saw its occupancy rate edge down by 0.4 percentage points (pp) to 97.1%, mainly attributed to the fall in occupancy rate of Raffles City Singapore (where its retail occupancy fell from 97.1% in Q3 to 91.0% in Q4, due to AEI works in the period under review.)

Debt Profile (Q3 FY2022 vs. Q4 FY2022)

Just like how I have looked at the REIT’s portfolio occupancy profile in the previous section, I will also be reviewing its debt profile by comparing the statistics reported in the current quarter under review (i.e. Q4 FY2022) against that reported in the previous quarter 3 months ago (i.e. Q3 FY2022) to find out if it has continued to remain healthy:

My Observations: The REIT’s debt profile, compared to the previous quarter, was a mixed bag – on the positive side, aggregate leverage fell slightly to 40.4%, and percentage of borrowings hedged to fixed rates went up slightly to 81%; on the negative side, its average cost of debt edged up slightly to 2.7% (within my expectations due to the high interest rate environment we are in right now), along with interest coverage ratio coming down slightly to 3.7x.

In terms of debt maturities in the coming financial years ahead, 12% (or S$1,166m) of its borrowings will be maturing in FY2023, 17% (or S$1,701m) of its borrowings will be maturing in FY2024, 13% (or S$1,296m) of its borrowings will be maturing in FY2025, and the remaining 58% (or S$5,823m) of its borrowings will be maturing only in FY2026 or later, which is good to note.

Distribution Payout to Unitholders

The management of CapitaLand Integrated Commercial Trust declares a distribution payout to its unitholders on a half-yearly basis – once when it releases its results for the first half of the year (between 01 January and 30 June), and once when it releases its results for the second half of the year (between 01 July and 31 December.)

For the second half of financial year 2022, the management have declared a payout of 5.36 cents/unit – a 2.7% increase from the payout of 5.22 cents/unit declared in the same time period last year.

Together with the distribution payout of 5.22 cents/unit declared in the first half of the current financial year under review, the total distribution payout amounts to 10.58 cents – compared against the payout of 10.40 cents/unit in FY2021, this represents a 1.7% improvement.

Finally, if you are a unitholder of the blue-chip REIT, do take note of the following dates on the distribution payout:

Ex-Date: 08 February 2023
Record Date: 09 February 2023
Payout Date: 17 March 2023

Management’s Comments & Outlook (from the REIT’s Press Release)

Chairman Ms Teo Swee Lian:

“We are pleased to deliver a total DPU of 10.58 cents for CICT's Unitholders in FY 2022, up 1.7% year-on-year. On the environmental, social and governance (ESG) front, CICT has successfully retained its green building ratings, achieved 5-star rating for GRESB 2022 and won the Singapore Corporate Governance Award in the REITs and Business Trusts category at the SIAS Investors Choice Awards 2022, among other ESG accolades. CICT will continue to strive to make a positive impact on the communities it operates in while creating long-term value for Unitholders."

CEO Mr Tony Tan:

“CICT's FY 2022 financial performance had been boosted by the contributions from our newly acquired assets, a positive outcome from our series of portfolio reconstitution efforts. Our proactive asset management strategies have further strengthened and positioned CICT's portfolio to reap the benefits of favourable market trends in the commercial real estate sector. In addition to achieving higher property occupancy rates across the portfolio, CICT's tenants' sales per square foot in 2022 surpassed the 2019 pre-pandemic figure and shopper traffic also continued to trend upwards. The completion of the asset enhancement initiatives at Raffles City Singapore and Six Battery Road in 2022, together with distributable income contribution from CapitaSpring, is expected to contribute positively to CICT's performance in the new financial year.

Looking ahead, we will focus on riding the tailwinds of post-pandemic recovery to improve our operating metrics while carefully navigating macroeconomic uncertainties to manage costs. We remain firmly committed to delivering sustainable value to our stakeholders through disciplined execution of our value creation strategy in driving organic growth across the portfolio, while keeping a lookout for accretive investments.”

Closing Thoughts

Largely positive set of results reported by the blue-chip retail and office REIT in my opinion (and I’m quite sure you’ll agree with me as well) – the double-digit percentage growth in its financial performance was helped by contributions from the newly acquired properties, as well as its portfolio occupancy continuing to remain very strong, with occupancy rates of a huge majority of its properties maintained at above 90.0% (except 66 Goulburn Street, at 87.6%, 100 Arthur Street, at 68.8%.)

No doubt it is good to note that the REIT have a very high percentage of borrowings hedged at fixed rates (at 81%, which is one of the highest among the Singapore-listed REITs), but at the same time, it has about 42% (or S$4,163) of borrowings due for refinancing between now till the end of FY2025, which means to a certain extent, its debt profile is likely to weaken further, and distributions being impacted to a certain extent.

With that, I have come to the end of my review of CapitaLand Integrated Commercial Trust’s latest results for the full year ended 31 December 2022. Please note that all the comments you’ve read about above is purely my own which I’m sharing for educational purposes only, and do not represent any buy or sell calls for the REIT’s units. As always, please do your own due diligence before you make any investment decisions.

Related Documents

• Press Release
• Financial Statements
• Presentation Slides

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