CapitaLand Investment’s Group of REITs – What You Need to Know

CapitaLand Investment’s Group of REITs – What You Need to Know

What’s the first thing that comes to mind when CapitaLand is mentioned? Of course, it’s their malls from downtown malls such as Plaza Singapura and Bugis Junction located in central Singapore, to those located in the heartlands, such as Junction 8, Lot One Shoppers Mall, etc.

But CapitaLand’s business is much bigger than just the retail malls. In fact, there are a total of 5 real estate investment trusts (REITs) in Singapore managed by CapitaLand Investment (CLI), the largest REIT sponsor in the country, where it is also the largest unitholder in each of its REITs and business trusts. With their sponsor’s strong support, CapitaLand’s REITs continue to find attractive growth opportunities, demonstrating a strong commitment to consistently deliver value to their unitholders.

Being industry stalwarts, CapitaLand’s REITs have been consistently recognised as beacons of strong corporate governance. They have performed well on the Singapore Governance & Transparency Index 2022, where they have held leading positions: CapitaLand Ascott Trust (1st position), CapitaLand Ascendas REIT (2nd position), CapitaLand Integrated Commercial Trust (4th position), CapitaLand India Trust (6th position) and CapitaLand China Trust (11th position.) On top of that, CapitaLand’s REITs, cognisant of their responsibilities to the communities they operate in across the world, are also sustainability champions. In-line with the vision of CapitaLand’s 2030 Sustainability Master Plan, CapitaLand’s REITs have made significant strides in embedding sustainability in their businesses and operations.

In this post, I’ll be sharing with you more about each of the 5 CapitaLand REITs in terms of the assets it invests in, performance (financial, portfolio occupancy, and debt profile) over the last 10 years, along with snapshots of its business highlights for the first quarter of FY2023 ended 31 March.

Let’s begin…

1. CapitaLand Integrated Commercial Trust (SGX:C38U)

Brief History:

Debuted on the Singapore Exchange Securities Trading Limited (SGX-ST) as CapitaLand Mall Trust back in July 2002, where it was a pure-play Singapore-based retail REIT with 3 retail malls worth S$0.9 billion. It grew to 15 retail malls in its portfolio worth S$11.8 billion in December 2019, and was later renamed to CapitaLand Integrated Commercial Trust, or CICT for short, following its merger with CapitaLand Commercial Trust (which was a pure-play office REIT with 10 properties located in Singapore and Germany in its portfolio) in November 2020.

Today, CICT’s portfolio has grown to 26 commercial properties (catering for retail and office purposes), worth S$24.2 billion. The REIT was also the first to be included in Singapore’s benchmark Straits Times Index (STI) back in March 2005, and it has since remained as a constituent.

10-Year Performance (between FY2013 and FY2022):

Looking at the REIT’s financial performance over the last 10 years, its gross revenue and net property income saw a stable growth – with the former improving from S$729.2m in FY2013 to S$1,441.7m in FY2022, a compound annual growth rate (CAGR) of 7.1%, and the latter climbing from $502.7m in FY2013 to S$1,043.3m in FY2022, a CAGR of 7.6%.

Its portfolio occupancy profile has also been very strong. Occupancy rates have maintained at above 90+% – which provides a certain level of stability as far as its financial performance are concerned.

Debt profile has also remained very healthy – throughout the years, its aggregate leverage has been maintained at 30+% (and at this level, there remains plenty of debt headroom before the regulatory limit of 50.0% is reached.) No doubt it has climbed to slightly above 40.0% in FY2022, but in my opinion, it is still in a very healthy position.

Q1 FY2023 Highlights:

For the 1st quarter of FY2023, its financial performance, portfolio occupancy, and debt profile have continued to remain very strong (in my opinion), where:

  • Gross revenue and net property income saw a double-digit percentage growth (compared to the same period last year) due to contributions from acquisitions completed in 1H FY2022, along with higher gross rental income from existing properties.
  • Portfolio occupancy profile for its retail, office, and integrated development properties remains at a very high level of 98.5%, 94.8%, and 97.5%, respectively.
  • 77% of its borrowings are hedged at fixed rates (hence providing some ‘protection’ against the negative impact of interest rate hikes), and for the remaining 3 quarters of FY2023, it has just 4% (or S$430m) of borrowings due for refinancing – which is minimal in my opinion.

2. CapitaLand India Trust (SGX:CY6U)

Brief History:

CapitaLand India Trust, or CLINT for short, is the largest India-focused property trust in Singapore (for those of you who want to invest in the growing economy in India, you can have a look at this listed fund) and at the time of writing, its portfolio comprises of 9 world class IT business parks, 1 logistics park, 1 industrial facility, and 4 data centre developments in India, valued at S$2.7 billion.

Formerly known as Ascendas India Trust back when it was listed on the SGX-ST in August 2007, it became part of CapitaLand after the latter’s acquisition of Ascendas-Singbridge Pte Ltd in June 2019.A rebranding exercise was conducted in September 2022 to unify the ‘CapitaLand’ brand across its various businesses.

10-Year Performance (between FY2013 and FY2022):

Over the last 10 years, the Trust’s financial performance in terms of its gross revenue and net property income has seen stable growth – where the former went up from S$126.3m in FY2013 to S$210.6m in FY2022, a CAGR of 5.2%, and the latter also improving from S$72.1m in FY2013 to S$166.8m in FY2022, a CAGR of 8.7%. Another thing to note is that, the Trust is one of the few to see its gross revenue and net property income continuing to record year-on-year (y-o-y) improvements in FY2020, where most REITs saw their financial performances declined as a result of business disruptions from lockdowns due to the Covid-19 pandemic.

Portfolio occupancy have been maintained at a high level of above 95% in 8 out of 10 years – which in my opinion is very resilient.

As far as its debt profile is concerned, it is very healthy, where its aggregate leverage has moved in the range of 20+% to 30+% over the years. Even as its aggregate leverage is at 37.0% in FY2022, it is still a very comfortable debt headroom before the regulatory limit of 50.0% is reached, allowing the Trust the ability to embark on further yield-accretive acquisitions to further improve its distribution payouts.

Q1 FY2023 Highlights:

  • Net property income climbed by 5% in SGD-terms (from S$40.0m in Q1 FY2022 to S$42.0m in Q1 FY2023), but 16% in Indian Rupee-terms (from ₹2,225m in Q1 FY2022 to ₹2,579m in Q1 FY2023) due to higher portfolio occupancy, along with additional income contributions from Arshiya Warehouse 7 Mumbai, Industrial Facility at MWC Chennai and Block A in Hyderabad, and other income.
  • Committed portfolio occupancy (excluding Block A – a Grade A IT building in Hyderabad that has been re-developed, and recently completed in January 2023 [with tenants starting to move in], in place of the former Auriga building) is at a high of 92%, with rental reversions for most of its new and/or renewed leases at positive percentages.
  • Aggregate leverage continues to remain at under 40% (at 39%), with a high percentage (78%) of its borrowings hedged at fixed rates – this will mitigate some of the risks associated with the high interest rate environment we are in currently.

3. CapitaLand Ascendas REIT (SGX:A17U)

Brief History:

Formerly known as Ascendas REIT, CapitaLand Ascendas REIT or CLAR for short, is Singapore’s first, as well as largest business space and industrial REIT listed on the SGX-ST back in November 2002.

Back when the REIT was listed, its portfolio comprised only S$600m worth of assets. Fast forward to today, it has since grown into a global REIT anchored in Singapore, with a strong focus on tech and logistics properties in developed markets. Its portfolio is valued at more than S$16 billion – with its assets located in Singapore (62% concentration), as well as in the following countries (38% concentration): United States of America (US), Australia, and United Kingdom/Europe across 3 key segments, namely (i) business space and life sciences, (ii) logistics, and (iii) industrial and data centres.

Just like CICT, CLAR is also a constituent of the STI since June 2014 – in fact, back when the REIT was included, it was the 3rd REIT to be included in the benchmark index.

10-Year Performance (between FY2013 and FY2022):

CLAR’s financial performance over the last 10 years has been pretty impressive, with its gross revenue climbing from S$575.8m in FY2013 to S$1,352.7m in FY2022, a CAGR of 8.9%, and its net property income improving from S$408.8m in FY2013 to S$968.8m in FY2022, a CAGR of 9.0% – the best part is, the REIT continued to report improvements in its financial performance during the worst of the pandemic in 2020 when many countries were in lockdown and many REITs saw their financial performance impacted as a result. This can be attributed to the REIT’s long-standing strategy of maintaining a diversified portfolio across multiple countries, asset types and customer industries, which resulted in a stable cashflow for the REIT.

The occupancy rate of its portfolio over the same period is equally resilient – with an average of 91% occupancy and a positive rental reversion maintained every year (to my understanding, not many REITs are able to achieve such a commendable feat.)

The REIT’s aggregate leverage is also very healthy, where it has been maintained at 30+% level over the years – this provides ample debt headroom for the REIT to undertake more yield-accretive acquisitions as and when an opportunity arises.

Q1 FY2023 Highlights:

  • Portfolio occupancy continues to be very resilient at 94.4%, with a very impressive rental reversion of +11.1% recorded (contributed by a double-digit rental reversion for its properties in Singapore, US, and Australia.)
  • Aggregate leverage continues to remain under 40.0% (at 38.2% to be exact) despite the high interest rate environment, with 77% of its borrowings hedged at fixed rates. Finally, in terms of debt maturities, they are well staggered, with about 10+% of borrowings due for refinancing every year over the next few years.

4. CapitaLand Ascott Trust (SGX:HMN)

Brief History:

CapitaLand Ascott Trust (or CLAS for short), formerly known as Ascott Residence Trust, was listed on the SGX-ST in March 2006 and subsequently combined with Ascendas Hospitality Trust on 31 December 2019. CLAS is the largest lodging trust in Asia Pacific with an asset value of S$8.0 billion as at 31 December 2022.

CLAS’ international portfolio comprises 105 properties (57 serviced residences, 18 hotels/business hotels, 21 rental housing, and 9 student accommodation) with more than 18,000 units in 47 cities across 15 countries in Asia Pacific, Europe, and the US. Most of the properties are operated under the ‘Ascott’, ‘Citadines’, ‘Quest’ and ‘Somerset’ brands.

In terms of geography, approximately 60% of CLAS’ total assets are in Asia Pacific, 21% in The Americas, and 19% in Europe.

10-Year Performance (between FY2013 and FY2022):

Looking at the lodging trust’s financial performance over the last 10 years, it is a steadily rising one – where its gross revenue and gross profit recorded y-o-y growth every year except in FY2020, when the global hospitality industry was affected by the Covid-19 pandemic and subsequent travel restrictions. In terms of financial numbers, gross revenue climbed from S$316.6m in FY2013 to S$621.2m in FY2022, a CAGR of 7.0%, while its gross profit went up from S$161.2m in FY2013 to S$282.8m in FY2022, a CAGR of 5.8%. The performance of CLAS’ properties in terms of its Revenue Per Available Unit (or RevPAU for short) over the years has remained stable, hovering around S$120-140.

Its debt profile is also very robust, where over the last 10 years, aggregate leverage has been maintained at under 40.0% – this provides ample debt headroom for CLAS to make yield-accretive acquisitions before reaching the regulatory limit of 50.0%.

As international borders reopen along with the resumption of leisure and business travel, CLAS is well positioned to capture opportunities, supported by its geographically and diversified portfolio, range of lodging asset classes and a well-balanced mix of stable and growth income streams.

Q1 FY2023 Highlights:

  • Gross profit spiked up by 59% y-o-y, driven by stronger operating performance, and contributions from new properties. Stripping out the latter, gross profit improved by 53% y-o-y.
  • Portfolio RevPAU continued to see recovery in Q1, reaching S$127, which is 93% of Q1 FY2019 pro forma RevPAU.
  • Debt profile continues to remain strong, with aggregate leverage at 38.7%, and S$1.7 billion of debt headroom available before reaching the regulatory limit of 50.0%. 75% of its borrowings are hedged at fixed rates. Average cost of debt is also at a low of just 2.3%. Looking ahead, only 14% (or S$401m) of its borrowings are due for refinancing in FY2023.

5. CapitaLand China Trust (SGX:AU8U)

Brief History:

Listed on the SGX-ST since December 2006 as CapitaLand Retail China Trust, with a portfolio comprising just retail malls in China, the REIT has since expanded its mandate to include office and industrial purposes (including business parks, logistics facilities, data centres and integrated developments) in September 2020. The REIT was renamed as CapitaLand China Trust in 2020 and over the last 2.5 years, has enlarged its portfolio to include business and logistics parks.

Today, its portfolio comprises 11 retail properties (located predominantly in tier 1 and 2 cities, at densely populated areas with good connectivity to transportation amenities), 5 business parks a (situated in high-growth economic zones, and easily accessible via various modes of transport), and 4 high-quality modern logistics parks (situated near transportation nodes such as seaports, airports, and railways to serve the growing domestic logistic needs of China’s Eastern, Central, and Southwest regions) located in 12 Chinese cities, with a total asset of approximately S$5.2 billion.

Also, not forgetting to mention that CLCT is currently Singapore’s largest China-focused REIT.

10-Year Performance (between FY2013 and FY2022):

Gross revenue and net property income demonstrated steady growth over the last 10 years – with the former climbing from S$160.1m in FY2013 to S$383.2m in FY2022, a CAGR of 9.1%, and the latter improving from S$103.0m in FY2013 to S$254.2m in FY2022, a CAGR of 9.5%.

Occupancy rate of the REIT’s properties has been very strong –maintained at above 95.0% throughout the 10-year period, with positive rental reversions recorded in most of the years – this has contributed to the REIT’s steady growth in its financial performance.

As far as its debt profile is concerned, aggregate leverage over the years have been maintained at 40.0% or under – which is a very comfortable one in my opinion as there remains a good 10% of debt headroom before the regulatory limit is reached. At the same time, having such a debt headroom allows the REIT flexibility to pursue yield-accretive acquisitions as and when an opportunity arises.

Q1 FY2023 Highlights:

  • Gross revenue declined slightly by 2.9% (from RMB489.9m in Q1 FY2022 to RMB475.5m in Q1 FY2023), while net property income dipped by 1.6% (from RMB344.5m in Q1 FY2022 to RMB339.1m in Q1 FY2023) due to the winding down of CapitaMall Qibao, downtime from assets undergoing asset enhancement initiatives/unit reconfiguration, as well as lag time from committed occupancy handovers.
  • Occupancy rates of its properties continue to remain very strong, as follows: Retail (96.4%), Business Park (89.8%), Logistics Park (95.6%).
  • Aggregate leverage stands at 40.0% and 75% of its borrowings are hedged at fixed rates. Also, the REIT has successfully refinanced S$200m loan due in Q1 FY2023 and has secured all refinancing requirements for FY2023.

Closing Thoughts

After reading about all the 5 CapitaLand REITs above, I’m sure you’ll agree with me about the stability of their financial performances (in that all of them have seen their gross revenue and net property income recording a CAGR of at least 4-5% over the last 10 years), portfolio occupancy (where overall portfolio occupancy of all 5 REITs’ properties are at least 90% occupied), and also debt profile (where they have at least 10% headroom from the regulatory limit and at least 75% of their borrowings hedged at fixed rates. This helps mitigate the risks associated with the current high interest rate environment.)

While I’m not currently invested in the other 2 REITs (namely CapitaLand Ascott Trust, and CapitaLand China Trust), they are on my investment watchlist (as they meet my criteria for selection in terms of financial performance, portfolio occupancy and debt profile). I’m looking to add them into my long-term investment portfolio in time to come.

With that, I have come to the end of my sharing on the 5 CapitaLand REITs. As always, I hope that the presentation above has given you a better understanding of them.

Disclaimer: This post was written under the sponsorship of CapitaLand Investment Limited. At the time of writing, I am a unitholder of CapitaLand Integrated Commercial Trust, CapitaLand India Trust, as well as CapitaLand Ascendas REIT.

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