CapitaCommercial Trust

DMG Research, March 26

WE VISITED CapitaGreen's showroom on Monday morning and were wowed by its 40th-floor sky garden and restaurant, innovative technology which directs cool air inwards, and unique dual facade that cuts solar heat, among others. Set to be CapitaCommercial Trust's (CCT) next growth driver, it offers about 700,000 square feet (sq ft) of Grade-A office space and is scheduled to receive its temporary occupation permit by Q4 2014.

Due to a dearth of immediate drivers, however, CCT is still a "neutral" and its $1.70 target price remains unchanged as the contribution from CapitaGreen would only stream in by FY2015.

CapitaGreen's unique features include a high ceiling, sky terraces on the fifth, 14th and 26th floors, a gym and pool on level 38, column-free efficient floor plates that range in size between 12,000 sq ft and 26,000 sq ft, and a cool void at the top of the building that draws in cool air from the "sky forest" on the top floor.

Not only is the cool void a unique architectural feature, previous studies have shown that the cool air it draws in could reduce the average temperature in the building by two degrees. Through this, we expect CapitaGreen's utility cost to be lower than that of other office towers.

CapitaGreen is located in the heart of Singapore's CBD, and is served by the Raffles Place and upcoming Telok Ayer MRT stations. In addition, CCT has indicated that tenants of CapitaGreen will have priority access to the Golden Shoe car park which currently features 1,053 parking lots.

CapitaGreen is a joint development by CapitaLand, CCT and Mitsubishi Estate Asia. In this project, CCT owns 40 per cent equity interest as well as a call option to acquire the remaining 60 per cent within three years upon receiving its temporary occupancy permit. We expect the building, involving a total development cost of $1.4 billion, to generate a forecast yield of 5.1 per cent-6.3 per cent when occupancy stabilises.

NEUTRAL