CapitaCommercial Trust

CapitaCommercial Trust: StanChart highlights 3 potential surprises: 1) CapitaGreen secures first tenant: BT reported that Cargill signed a 50,000 sf lease at above $9psfpm. This is ~10% above StanChart’s expectations that the first leases would be signed at $8-8.5psfpm. StanChart believes 50-80% pre-commitment by Sept’14 feasible, and expects avg rent of $11.5psfpm (instead of $10.7psfpm previously) and close to 6% yield on cost 2) CCT could buy the remaining stake in CapitaGreen. The remaining 60% stake is owned by CapitaLand (50%) and Mistubishi Estate Asia (10%). CCT has a call option to buy the asset within 3 years of completion of valuation, provided the price gives a minimum 6.3% annual return. With low gearing of ~29%, CCT could fully fund a $1.1b acquisition with debt and still keep gearing below 40%. StanChart expects the transaction to be 2-4% earnings accretive. 3) If CCT fully owned CapitaGreen, it would be its largest asset in the portfolio and will contribute 18% of NPI in 2016e. Grade A offices will then make 33% of its NPI. Long leases with fixed escalations in Raffles City, HSBCBuilding and Capital Tower make up c.28% of 2016E NPI providing stability even if office rents start to decline. StanChart has an O/PF with TP raised to $1.72 from $1.63.