- 23% pre-commitment leases signed to-date for CapitaGreen.
- The expanded scope for AEI at Capital Tower will delay the completion date by six months to 4Q15.
- GIC to renew leases at Capital Tower next year with significant reversion.
CCT saw a 3.2% YoY rise in both 2Q14/1H14 revenue, bolstered by higher income from all properties except One George Street, whose Deed of Yield Protection expired on 10 Jul 2013. 2Q14/1H14 DPU grew 5.3%/5.2% YoY to 2.18/4.22 SGD cts, driven by lower interest expenses and higher NPI. Balance sheet remained strong, with a low gearing of 28.8% and 80% of borrowings are on fixed rates. Portfolio occupancy remained strong at 99.4%.
CapitaGreen achieves 23% pre-commitment
CapitaGreen has secured another 14,200 sq ft of lease commitments since its topping-out on 2 Jul, boosting its NLA take-up rate from 21% to 23%. To reach the 50% pre-commitments by year-end, an additional 185,000 sq ft needs to go. We expect the new tenants to be signing up at rentals north of SGD10-11 psf/month vs ‘loss-leader’ Cargill, who contracted for 51,000 sq ft previously at a likely rental of SGD9-10 psf/month. The AEI at Capital Tower has also expanded its scope at an unchanged budget of SGD40m, but completion will be pushed back by six months. GIC (CCT’s top 10 tenant contributing 5% of monthly gross rental income) will be renewing its leases at Capital Tower next year, with significant reversion, given its low base, according to management. CCT stands to benefit from higher office spot rents given its favourable lease expiry profile: ~49% 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 = 6.7%; Tg = 2%).
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