CAPITAMALL Trust (CMT) is exploring the possibility of developing malls on top of managing them.
CapitaMall Trust Management (CMTML) chief executive Simon Ho said the trust can capitalise on its huge $8 billion asset size to 'selectively participate in greenfield development projects' that can add to its growth.
Real estate investment trusts (Reits) are allowed to use up to 10 per cent - or $800 million in the case of CMT - of their assets for development projects according to property fund guidelines, he said.
'In the past, we did not aggressively push this fourth engine. Going forward, I think that this is something we will want to explore further,' Mr Ho said at CMT's second-quarter financial results briefing at Capital Tower yesterday.
This will not only serve to provide a pipeline of new assets that can be added to its existing properties, but will also allow the Reit to achieve a higher yield on cost compared to a completed property, CMTML deputy CEO Jesline Goh added.
CMT, together with its sponsor CapitaMalls Asia, put in a joint bid of $728.8 million for a multi-purpose site in Jurong Gateway Road last month. Its bid, however, came in 3 per cent lower than that of Australia-based developer Lend Lease.
In its results, Singapore's largest Reit notched up a 7.5 per cent rise in distribution per unit (DPU) to 2.29 cents, from 2.13 cents a year earlier, driven mainly by higher rental rates for new and renewed leases and lower operating expenses.
Second-quarter distributable income also rose 7.5 per cent year-on-year to $73.1 million, while net property income gained 5.3 per cent to $98.8 million.
The trust's overall portfolio has seen strong rental reversions as the leasing market for retail space continues to show signs of strength, Mr Ho said.
'The retail sales index has been in positive territory seven months in a row if you strip away motor car sales... Consumer confidence is high and tourism is firing on all cylinders. Overall, these macro factors are good for retail,' he added.
CMT also expects higher returns on investments due to higher projected rental revenue and lower construction costs for its asset enhancement initiatives at Raffles City Singapore and JCube - the former Jurong Entertainment Centre.
However, its total portfolio valuation as of June 30 shrank by $92.7 million, owing mainly to a 17.8 per cent or $127 million devaluation of The Atrium @Orchard from $714 million as of Dec 31 last year to $587 million as of June 30.
Asset enhancement works are set for early next year, to be completed by the third quarter of 2012, to integrate The Atrium with its neighbouring mall Plaza Singapura - also part of CMT's portfolio - to create a 'seamless shopping experience'.
CMT also completed a $268 million acquisition of Clarke Quay on July 1, bringing the asset size of its 15 properties to about $8 billion as valued on June 30.
Unit holders can expect to get their second-quarter DPU on Aug 27. CMT's units remained unchanged yesterday at $1.98.
Separately, ARA Trust Management - manager of Suntec Reit - said its DPU for the second quarter fell 15.1 per cent from 2.98 cents to 2.53 cents year-on-year.
Net property income fell 2.8 per cent to $47.4 million, while distribution income dipped 3.7 per cent to $45.9 million. Gross revenue was 3.3 per cent lower at $62.4 million. Suntec Reit's units were up one cent to $1.44 yesterday.
Source: Straits Times, 23 Jul 2010