Post-COVID 19 Recovery Play - Giant Retail & Office LandLords

Own cash-generative, monopoly-like assets

Frasers Centrepoint Trust (FCT) has proposed to acquire 5 new shopping malls. The merger between CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT) would create the largest REIT in Singapore, CapitaLand Integrated Commercial Trust (CICT) by the end of 2020. Besides these 2 mega REITs, if one is also vested in Mapletree Commercial Trust (MCT), he/she would be well-positioned for the post-COVID recovery once the HarbourFront precinct is fully redeveloped. In fact, shoppers and diners have begun streaming back to the malls, especially on weekends. After witnessing the crowds, I am starting to question if the current recession is as bad as originally reported. The malls owned by FCT, CMT and MCT are conveniently located near MRT stations and large population catchment areas, thus ensuring high human footfall. They enjoy a monopolistic grip over strategically-located retail spaces in Singapore. As long as there is no second Circuit Breaker (fingers-crossed!), these 3 retail & commercial REITs are solid long-term recovery plays in my opinion. Huge dose of patience required. Collecting rental income from forty properties. FORTY!!!

"Landlords grow rich in their sleep"

~ John Stuart Mill~

Retail S-REITs Rate-Hike Sensitivity Data Comparison (4Q2016)

The local retail sector has been facing a few headwinds for the last couple of years. The increased proliferation of e-commerce, manpower shortage as well as higher operating costs have battered retailers big and small. We need experience heads to guide the malls through the stormy sea. These 4 retail REITs in my 'shopping list' have stood the test of time (so far).

Frasers CentrePoint Trust:
1. Gearing: 29.7%
2. Average Debt Maturity: 2.6 years
3. Debt Maturity Profile: 2017 (25.4%), 2018 (7.6%), 2019 (15.3%), 2020 (17.8%)
4. WALE: 1.5 years
5. Interest Coverage: 7.29 times
6. All-in debt costs: 2.1%
7. % of borrowings hedged on fixed rates: 56%
8. NAV: $1.93

CapitaLand Mall Trust:
1. Gearing: 34.8%
2. Average Debt Maturity: 5.3 years
3. WALE: 2 years
4. Interest Coverage: 4.8 times
5. All-in debt costs: 3.2%
6. NAV: $1.86

Starhill Global REIT:
1. Gearing: 35.2%
2. Average Debt Maturity: 3.1 years
3. WALE: 4.8 years
4. Interest Coverage: 4 times
5. All-in debt costs: 3.16%
6. % of borrowings on fixed rates: 99%
7. NAV: $0.92

SPH REIT:
1. Gearing: 25.7%
2. Average Debt Maturity: 2.8 years
3. WALE: 2.4 years
4. Interest Coverage: 6 times
5. All-in debt costs: 2.81%
6. % of borrowings on fixed rates: 85.9%
7. NAV: $0.94

DW 1Q2013 Retail S-REITs Review: The Twin Pillars of Retail REITs in Singapore

In my view, CapitaMall Trust (CMT) and Frasers CentrePoint Trust (FCT) are the twin pillars of retail REITs in Singapore. I am not reviewing Suntec REIT until next year because everyone knows Suntec City is undergoing extensive AEI works right now. Nothing new to review on.

You can check out my previous review here. 

Together with the hotly-debated 'White Paper', the Singapore government had recently outlined the future development plans in various parts of the island. These changes should be taking place over the next two decades. Basically, I called this phenomenon 'Rise of the Regional Hubs'. ^^

CapitaMall Trust - Riding on the Jewel of the West

The URA plans to develop the Jurong Lake District into a bustling hub.

If you believe in the Jurong Panorama story, you may want to position yourself to reap long-term benefits from the URA future plans. Jurong is going to become the CBD of the West.

• West Gate Mall is scheduled to be fully-operational by December 2013, to capture the year-end shopping crowd. Rental contributions should start flowing in 4Q2013.
• IMM AEI is scheduled to be completed by mid-2013. Rental contributions should start flowing in 3Q2013.
• Bugis Junction's medium-scale AEI to start in 2Q2013 and is scheduled to be completed by 3Q2014. Rental contributions should drop gradually over the next 3 to 4 quarters going forward. Fortunately, this drop should be well-mitigated by the income boost from West Gate and IMM. DPU should remain stable. The rental rates at Bugis Junction will probably increase after the AEI is completed in 2014.
• The various successful AEIs at Raffles City, Plaza Singapura, Atrium@Orchard and Bugis+ Mall have showcased the management's experience and strong execution. With a solid track record under their belt, they simply do not mess around. They have been delivering their promises to the unit-holders. ^^
• No refinancing needs this year. Debt maturity profile is healthy. Gearing level is lowered slightly. Still has the best credit-rating among its peers. 
• Achieved positive rental reversion of 6%.
• Occupancy rates and shoppers traffic remain high.

Frasers CentrePoint Trust - Growing Together With Woodlands Regional Centre

Occupancy rates at both Causeway Point and North Point are at 100%. It is now full-steam ahead for Causeway Point after the AEI is completed. 

• Achieved positive rental reversions of 10%. 
• DPU on a strong uptrend. 
• No refinancing needs this year. 
• Looking to acquire Changi City Point by 2014, before its new rental cycle starts.  To be funded by both debt and equity. 

Let your portfolio ride on these two Regional Hubs! ^^


Rock on,
Dividend Warrior