- The new tenants for CapitaGreen are insurer Jardine Lloyd Thompson and a global law firm, Jones Day.
- Another 200,000 sq ft to go before reaching the targeted 50% pre-commitments by year-end.
- Reiterate BUY with an unchanged TP of SGD1.83.
We attended the topping-out ceremony of CapitaGreen, which is on track to complete by year-end. CapitaCommercial Trust (CCT) also announced that it has secured YTD pre-commitment of 21% (150,800 sq ft) of total NLA for CapitaGreen vs 12% three months ago. The new leasees include Jardine Lloyd Thompson (an insurance/reinsurance firm; currently at One Raffles Quay) and Jones Day (a law firm; presently at Samsung Hub), alongside Cargill, Bordier & Cie (moving out of GB Building along Cecil Street) and an international gym operator. CCT had previously stated that it was in discussions with other prospects and was optimistic of achieving 50% (another 200,000 sq ft) pre-commitments by year-end.
What’s Our View
We expect the new insurance and business service tenants to be signing up at rentals north of SGD10-11 psf/month vs ‘loss-leader’ Cargill, who contracted for 51,000 sq ft at a likely rental of SGD9-10 psf/month. Being one of two major prime office developments (the other is the 527,000-sq-ft South Beach Development) in the CBD due to complete this year and next, we expect CapitaGreen to be fully occupied by end-2015, with higher rentals of SGD11-12 psf/month progressively signed in 2H14-2015. CCT is poised to benefit from higher office spot rents as it has one of the most favourable lease expiry profiles among office REITs: ~52% of office leases, by monthly gross rental income, are expiring in 2014-2016. Reiterate BUY with an unchanged DDM-derived TP of SGD1.83 (cost of equity = 6.8%; Tg = 2%).
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