8 Key Numbers to Understand CapitaLand Mall Trust Better
CapitaLand Mall Trust (SGX: C38U), or CMT, is the first real estate investment trust (REIT) to be listed in Singapore back in 2002. It is also the largest retail REIT by market capitalisation, at S$8.8 billion, and owns 15 quality shopping malls comprising a diverse list of around 2,800 tenants. Some of the malls within CMT’s portfolio include the newly-refurbished Funan, Junction 8, IMM, Plaza Singapura, and Bugis Junction.
It may seem a daunting task for an investor to try to understand such a large and established REIT. I will make this task easier by zooming in on eight key aspects of the REIT so as to provide investors with a clearer picture of how CMT operates, and also how it is performing. The numbers I use will be from CMT’s latest Q1 2019 earnings report and presentation slides.
1. CMT reported a 3.6% year-on-year growth in its distribution per unit (DPU) to 2.88 Singapore cents. Annualised DPU is thus 11.68 Singapore cents, and at CMT’s last closing price of S$2.57, the REIT provides an annualised distribution yield of 4.5%.
2. Rental reversion rate stood at a positive 1.2% for the portfolio. This compares the increase or decrease in current rental rates versus preceding rental rates (usually committed on a three-year basis). An increase is positive for the REIT as it shows that tenants are still able to stomach higher overall rental rates despite the slowdown in the retail sector this year.
3. CMT’s portfolio continued to exhibit a high occupancy rate of 98.8%. Note that this excludes Funan which was closed on 1 July 2016 for redevelopment. Most of the malls within CMT’s portfolio have occupancy rates ranging from 97% to 99% and have maintained these levels for the past five years.
4. Aggregate leverage for the REIT stands at 34.4%, which is way below the statutory gearing limit of 45% for Singapore REITs. This gives the REIT headroom for additional borrowings for yield-accretive acquisitions.
5. Average debt term to maturity is 4.2 years, slightly down from 4.4 years as of 31 December 2018. This is probably due to bank loans being refinanced on shorter loan tenure.
6. CMT’s average cost of debt has increased slightly to 3.2% from 3.1%. This is in line with an overall increase in global interest rates. CMT also entered into fixed rate loan agreements to “freeze” interest rates, thereby accepting slightly higher interest rates compared to previously.
7. Shopper traffic increased by 2% year-on-year, and this is a good sign as it measures the footfall from shoppers for all of CMT’s malls. With higher footfall usually comes higher spending, and this will benefit CMT’s tenants.
8. However, tenant sales per square foot per month declined by 0.4%year-on-year. This is probably due to the weaker retail environment as reported in the news in April 2019, and is in line with more cautious sentiment arising from the continued US-China trade war. Though footfall may have increased, consumers may be doing more window shopping and holding back on larger purchases for now.
Investors in CMT can look forward to better numbers with the re-opening of Funan on 28 June 2019, as the REIT had already secured more than 90% take-up rate for its retail and office towers. Total gross floor area is 887,000 square feet, and the mall will be connected to City Hall MRT station via a new underpass. This asset should start contributing to CMT’s earnings in the second half of 2019.