Cambridge Industrial Trust

Cambridge Industrial Trust: CIMB maintains Hold but lowers TP to $0.70 (from $0.78), on lower DPU forecasts. 3Q14 results were stable, with gross revenue of $2.5m (+5% y/y) and DPU of 1.25¢ (-0.1%), but NPI margin dipped y/y in 3Q14 from 85% to 78.6%, due to costs involved in conversion of two industrial properties from STBs (single tenant building) to MTBs (multi tenant building). At the DPU level, weakness was largely offset by the $0.6m mgt fees issued in units instead of cash. CIMB notes in the initial stage of converting STBs to MTBs, a REITs earnings could be negatively impacted in several ways, including: i) dip in efficiency of space as units are cut out, ii) loss of triple net leases, and iii) dip in occupancy. Though this could be offset by higher rent in the long run.