CapitaLand Retail China Trust posts 2.1% rise in 4Q DPU to 2.42 cents; announces 'bundle' acquisition and divestment in Hohhot

SINGAPORE (Feb 1): The manager of CapitaLand Retail China Trust (CRCT) announced a distribution per unit (DPU) of 2.42 cents for the 4Q18 ended December, 2.1% higher than DPU of 2.37 cents a year ago.

This brings full-year DPU for FY18 to 10.22 cents, 1.2% higher than DPU of 10.10 cents in FY17.

Distributable amount to unitholders grew 7.7% in 4Q18 to $23.7 million, compared to $22.0 million a year ago.

During the quarter, CRCT saw the addition of $2.5 million in distributable income contribution from joint ventures, due to its newly acquired 51% interest in Rock Square.

Gross revenue rose 3% to $55.7 million in 4Q18, from $54.1 million a year ago.

The increase was mainly due to stronger rental growth from the multi-tenanted malls. In addition, CapitaMall Wuhu received a one-off compensation during the quarter, following the exit of its anchor tenant

Total property operating expenses fell 5.9% to $19.9 million in 4Q18, from $21.1 million a year ago. This was mainly due to the lower operating expenses in CapitaMall Wuhu, following its closure.

Consequently, net property income (NPI) grew 8.8% to $35.9 million in 4Q18, from $33.0 million a year ago.

Portfolio occupancy as at Dec 31, 2018, was 97.5% and rental reversion was 10.9%.

As at end December, cash and cash equivalents stood at $173.9 million.

“China’s more moderate pace of growth is reflective of an economy undergoing transition and its long-term fundamentals remain positive. We are confident that CRCT’s quality family-oriented shopping malls will continue to benefit from China’s growing middle class and policies implemented to stimulate the economy,” says Soh Kim Soon, chairman of the manager.

According to Soh, China’s retail sales rose 9% year-on-year to RMB38.1 trillion ($7.7 trillion) in 2018, on the back of a 7.8% rise in urban disposable income and a 6.8% increase in expenditure per capita.

The manager of CRCT on Friday also announced it has entered into a bundle deal in Hohhot, the capital of China’s Inner Mongolia province.

The deal will see CRCT acquire a new mall in Yuquan District at an agreed property value of RMB808.3 million, and transfer its entire interest in a company that holds CapitaMall Saihan to a party related to the vendor of the new mall at an agreed property value of RMB460.0 million.

CRCT intends to finance the acquisition through a combination of existing cash and debt, as well as use all the proceeds from the divestment to partially finance the acquisition.

“To further optimise our portfolio, we have entered into a bundle deal in Hohhot with unrelated third parties to divest CapitaMall Saihan and acquire a new mall that is double in size and has a longer balance tenure. Given the new mall’s higher growth potential, CRCT will be in an even stronger position to tap Hohhot’s promising retail growth,” says Tan Tze Wooi, CEO of the manager.

CRCT targets to take over the new mall in 2H19 and open the mall in 2H20.

The eight-storey mall in Yuquan District has a gross floor area, excluding car park, of 76,309 sq m. Part of a mixed-use development that also includes residential, SOHO and office components, the mall is strategically located within a well-established commercial hub.

“Compared with CapitaMall Saihan, the new mall will feature a larger proportion and greater variety of new concepts that will create leasing synergies with the rest of our multi-tenanted malls and enhance CRCT portfolio’s tenant diversification,” says Tan.

“Supported by CRCT’s strong financial position, we will continue to explore suitable acquisition opportunities to grow and rejuvenate our portfolio,” he adds.

Units of CRCT closed 4 cents higher, or up 2.7%, at $1.50 on Thursday.