Cambridge Industrial Trust (CIT): Overall, 2015 was a relatively resilient year for CIT. FY15 rental revenue rose 13% yoy to $110m, thanks largely to positive rental reversion of 9.1% and above industry average occupancy.
It achieved portfolio average of 94.3% occupancy vs. 90.8% for JTC Industrial. It also achieved $1.12 psf for its single-tenanted buildings (STBs) and $1.45 psf for its multi-tenanted buildings (MTBs), resulting in an overall rent of $1.27 psf. Given the upcoming supply-glut, CIMB expects forward rental renewals to be flattish.
2016 could be a somewhat volatile year for CIT as 22.2% of its rental income would be due for renewal – 9.2% from STBs and 13% from eight MTBs.
Management has guided that of the eight MTBs, two will be divested (small assets; CIMB expect proceeds to be channeled to AEIs and MBT conversions); four will be renewed; one will be converted to a MTB and the remaining one will go through AEI (est. capex of $2m).
Given that CIT’s lease expiry will peak in 2016 (which could translate to lower NPI margins), its flattish rental reversions, higher interests expense and absence of capital distribution, CIMB cuts its FY16-17 DPUs by 14-17%.
The house has a Hold rating and reduced TP of $0.57 (from $0.73).
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