CapitaLand Integrated Commercial Trust (SGX:C38U), or CICT for short, formed as a result of a merger between CapitaLand Mall Trust and CapitaLand Commercial Trust, is currently the largest REIT in Singapore, and also one of the largest REITs in Asia Pacific by market capitalisation. Currently, the REIT’s portfolio comprises 23 retail, office, and integrated developments in Singapore (21) and in Frankfurt, Germany (2).
This morning (28 January 2022), the REIT has released its results for the second half, as well as for the full-year ended 31 December 2021 (i.e. FY2021). I have studied the results posted and in this post, you’ll find a summary of the most important aspects about the REIT’s most recent financial results, portfolio occupancy and debt profile, and distribution payouts declared to its unitholders, together with my thoughts about its latest performance and outlook for the year ahead.
Let’s begin…
Financial Performance (2H FY2020 vs. 2H FY2021, Q4 FY2020 vs. Q4 FY2021, and FY2020 and FY2021)
In this section, I will be looking at CICT’s financial performance from the various angles – for the second half of the financial year (2H FY2020 vs. 2H FY2021), for the fourth quarter of the financial year (Q4 FY2020 vs. Q4 FY2021 – which I have computed based on its financial results for the third quarter, as well as for the second half of the respective financial years), and also for the full-year (FY2020 vs. FY2021):
2H FY2020 vs. 2H FY2021:
| 2H FY2020 | 2H FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $426.8m | $659.4m | +35.3% |
| Property Operating Expenses (S$’mil) | $130.4m | $180.5m | +27.8% |
| Net Property Income (S$’mil) | $296.4m | $478.9m | +38.1% |
| Distributable Income to Unitholders (S$’mil) | $259.7m | $338.8m | +23.3% |
Comparing the REIT’s financial results recorded for the second half of FY2021 against the same time period last year, it was an improved one, due to contribution from the enlarged portfolio following the merger with CapitaLand Commercial Trust on 21 October 2020 (you can read the news about it in full here, for those of you who like to know more), along with lower rental waivers granted to tenants.
Q4 FY2020 vs. Q4 FY2021:
The following table is CICT’s results on a quarter-on-quarter (q-o-q) basis which I have computed:
| Q4 FY2020 | Q4 FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $276.5m | $330.4m | +19.5% |
| Property Operating Expenses (S$’mil) | $84.6m | $94.1m | +11.2% |
| Net Property Income (S$’mil) | $191.9m | $236.3m | +23.1% |
Just like its results for the second half of the year, the REIT’s results for the fourth quarter of FY2021 (for the period between 01 October and 31 December 2021) improved against the same time period last year (i.e. the fourth quarter of FY2020 between 01 October and 31 December 2021) due to contribution from the enlarged portfolio following the merger on 21 October 2020.
FY2020 vs. FY2021:
| FY2020 | FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $745.2m | $1,305.1m | +75.1% |
| Property Operating Expenses (S$’mil) | $232.5m | $354.0m | +52.3% |
| Net Property Income (S$’mil) | $512.7m | $951.1m | +85.5% |
| Distributable Income to Unitholders (S$’mil) | $391.4m | $674.7m | +82.7% |
The huge improvement in the REIT’s full-year results for the current financial year under review is largely due to contributions from the enlarged portfolio following the merger, coupled with lower rental waiver granted to tenants.
Portfolio Occupancy Profile (Q3 FY2021 vs. Q4 FY2021)
When it comes to reviewing a REIT’s portfolio occupancy profile, I tend to put the statistics recorded for the quarter under review beside that reported in the previous quarter to find out whether or not it has improved or deteriorated (of course the former is very much preferred.)
In the table below, you’ll find a side-by-side comparison of CICT’s portfolio occupancy profile where I’d be comparing the stats recorded for the 4th quarter ended 31 December 2021 against that recorded for the 3rd quarter ended 30 September 2021:
| Q3 FY2021 | Q4 FY2021 | |
| Portfolio Occupancy (Retail) | 96.4% | 96.8% |
| WALE (by Gross Rental Income – Retail) | 1.9 years | 1.9 years |
| Portfolio Occupancy (Office) | 92.6% | 91.5% |
| WALE (by Gross Rental Income – Office) | 2.6 years | 3.2 years |
| Portfolio Occupancy (Integrated Development) | 96.2% | 96.0% |
| WALE (by Gross Rental Income – Integrated Development) | 5.0 years | 5.0 years |
My Observations: The overall portfolio occupancy rate for the REIT as at 31 December 2021 was 93.9% – a 0.5 percentage point (pp) decline compared to 94.4% recorded in the previous quarter as at 30 September 2021.
This can be attributed to slight dips in the occupancy rate for its office properties (down by 1.1pp to 91.5%, largely due to a drop in occupancy rate in Capital Tower from 97.2% in Q3 FY2021 to 76.8% in Q4 FY2021; that said, from the REIT’s presentation slides, I read that about 17.7% of Capital Tower’s net lettable area is under advanced negotiation), and also for its integrated development properties (which edged down 0.2pp to 96.0%, due to a slight dip in the occupancy rate of Plaza Singapura & The Atrium@Orchard from 97.7% in Q3 FY2021 to 97.2% in Q4 FY2021.)
In terms of the weighted average lease expiry (WALE) by gross rental income (GRI), they have remained more or less the same compared with the previous quarter (except for its office properties, which have improved to 3.2 years.
Debt Profile (Q3 FY2021 vs. Q4 FY2021)
Just like how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I too will be reviewing its debt profile the same way – i.e. comparing the statistics reported for the current quarter under review against that recorded in the previous quarter there months ago, as follows:
| Q3 FY2021 | Q4 FY2021 | |
| Aggregate Leverage (%) | 40.9% | 37.2% |
| Interest Coverage Ratio (times) | 4.1x | 4.1x |
| Average Term to Debt Maturity (years) | 4.1 years | 3.9 years |
| Average Cost of Debt (%) | 2.3% | 2.3% |
My Observations: One positive to note about the REIT’s debt profile for the current quarter under review is that its aggregate leverage have improved to 37.2% – mainly due to repayment of some borrowings, as well as an increase in the deposited property value from the portfolio appraisal as at 31 December 2021.
Based on its interest coverage ratio, the REIT is allowed to have an aggregate leverage capped at 50.0% – and at its current ratio, there still remains a comfortable debt headroom for the REIT to embark on further yield-accretive acquisitions as and when an opportunity to do so comes along.
Finally, in terms of debt maturity, in the coming financial years ahead, I must say they are quite well-staggered – with 13% (or S$1,099m) of its borrowings maturing in FY2022, 17% (or S$1,491m) of its borrowings maturing in FY2023, 17% (or S$1,435m) of its borrowings maturing in FY2024, and the remaining 53% (or S$4,607m) of its borrowings maturing in FY2025 or later.
Distribution Payout to Unitholders
Following CICT’s move to report its full financial results on a half-yearly basis from FY2020, it has also started to declare a distribution payout to its unitholders in the same time frequency.
For the second half of FY2021, the REIT’s management have already paid out a distribution of 4.85 cents/unit for the period between 01 July and 15 December 2021 pursuant to its private placement in December 2021, which was paid out today (28 January 2022) for unitholders who had invested in the REIT before the distribution went ex-dividend on 14 December 2021.
As such, for the period between 16 December and 31 December 2021, a distribution of 0.37 cents/unit was declared.
Adding the 2 distribution payouts together, the REIT’s distribution payout for the second half of FY2021 amounted to 5.22 cents/unit, a 8.9% decline from the 5.73 cents/unit declared in 2H FY2020 due to an enlarged base from the private placement in December 2021.
On a year-on-year (y-o-y) basis, the REIT’s payout for FY2021 totalled to 10.40 cents/unit, a 19.7% improvement from 8.69 cents/unit declared in FY2020.
If you are a unitholder of the REIT, do take note of the following dates regarding its upcoming distribution payout:
Ex-Date: 08 February 2022
Record Date: 09 February 2022
Payout Date: 15 March 2022
Closing Thoughts
All in all, the current financial year 2021 was a good one for the REIT in terms of its financial performance (in my personal opinion) – which was pretty much expected considering the fact that this year’s result was inclusive of a full-year contribution from properties as a result of the merger in October 2020. Looking ahead, I do not expect the same big percentage of improvement (both on a q-o-q as well as on a y-o-y basis) unless or otherwise there are more transactions of such a scale announced. I expect the growth of the REIT (as far as its financial performance is concerned) in the year ahead to remain stable.
Looking at its debt profile, it continues to remain pretty healthy – where its aggregate leverage still has ample debt headroom to go before the regulatory limit is reached.
If there’s one slight negative about the REIT’s results this time round, it will be its occupancy profile, which suffered a slight decline – that said, however, I’m not concerned as the occupancy rates of a huge majority of its properties are maintained at above 90.0% (except for Clarke Quay, where its occupancy rate as at 31 December 2021 was at 73.5%, due to leases affected by government-stipulated restrictions on trading hours and sales of alcohol at nightlife venues like clubs, karaoke joints, and bars without food licenses; Capital Tower, where its occupancy rate as at 31 December 2021 was at 76.8%; as well as Six Battery Road, where its occupancy rate as at 31 December 2021 was at 79.7% due to upgrading works.)
With that, I have come to the end of my review of CapitaLand Integrated Commercial Trust’s latest results for the second half, as well as for the full-year ended 31 December 2021. I hope you’ve found the contents presented in this post useful. Finally, do take note that everything you’ve just read above is purely for educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. As always, you’re strongly advised to do your own due diligence before you make any investment decisions.
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Disclaimer: At the time of writing, I am a unitholder of CapitaLand Integrated Commercial Trust.
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