Thursday, June 24, 2010

CapitaCommercial Trust

According to media reports, CCT could be close to selling StarHub Centre. The transaction price is expected to be above its Dec-09 valuation of $268m but this is still 19.5% below the end-08 valuation of $332.8m. For the FY09, StarHub Centre reaped gross rental income of $18.5m and net property income of $15.2m, which contributed 5% of the trust's net property income. We understand that GuocoLand and Fraser Centrepoint have expressed interest for the property.

A sale of StarHub Centre would not be surprising given that CCT has already said it was reviewing plans for the non-Grade A property earlier this year. Notably, it makes sense for CCT to divest the property rather than redevelop it into a mostly residential project itself as that may stoke concerns about the trust losing its focus on commercial property. Following the divestment, CCT may reinvest the proceeds to reduce debt, purchase new office properties. The REIT still offers yield of 6%.

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