Being a shopping-mall landlord is a risky business in the age of e-commerce, even in retail-crazy Singapore. So it’s only sensible that CapitaLand Mall Trust is merging with CapitaLand Commercial Trust, which owns offices.

The S$8.3 billion ($6.2 billion) deal between the two sister real estate investment trusts, or REITs, will create a property owner of some heft. The combined entity will have the firepower to undertake up to S$4.6 billion in overseas acquisitions. At home, the revenue stream from shops — under pressure from online sales — will get commingled with more stable office rents.

That will be a relief. CapitaLand Mall Trust’s income available for distribution grew a healthy 7.5% last year, but the REIT’s tenants saw sales decline 1.4% on a per-square-foot basis, with electrical and electronics, home furnishings and information technology and telecommunications recording falls of more than 10%, according to figures released Wednesday.



This is part of a global trend. As I wrote in July, Singapore’s Generation Z — those born after 2000 — won’t be mall rats. It will be a challenge for landlords to eke out positive rental “reversions” when tenancies come up for renewal. More than half of Rafffles City Singapore, a marquee property in the trust’s portfolio, was leased out again last year, and the  owner saw no increase in rates. At The Atrium@Orchard — another prestigious downtown location — rentals dropped 6.5% from when CapitaLand Mall signed them three years earlier.

Mind you, Singapore’s office market is also showing signs of fatigue. Rents for Grade A offices stopped rising in the December quarter as the city’s small, open economy slowed amid U.S.-China trade tensions. Colliers International Group Inc. forecasts they will climb just 1% in 2020, before sliding 4% next year. Things could get uglier still if the co-working trend comes under strain following last year’s  WeWork debacle.

Even those worried about the shared-space segment should be encouraged by the technology industry — especially fintech. With 21 bids for up to five new digital bank licenses, the outlook for the city’s office market is more optimistic than it is for retail. CapitaLand Commercial Trust generally experienced positive rental reversions during the December quarter. Properties such as Six Battery Road, formerly Standard Chartered Plc’s Singapore headquarters, and 21 Collyer Quay, where WeWork will move in after HSBC Holdings Plc moves out, could do even better after the landlord spruces them up this year.

Singapore’s office market will also undergo transformation as city planners make a deliberate attempt to have more people living in and around the central business district. The idea is to increase the utility of the island’s priciest real estate so that it’s not a ghost town after working hours. As part of the plan, old office towers near the central bank and the stock exchange will be redeveloped as mixed-use properties that have more space to sell or rent out.

Neither these structural changes nor the cyclical ebb and flow of office demand and supply is a surprise to property builders and owners. Assessing the retail industry is trickier. Not only could it be facing terminal decline because of surging digital consumption, it’s also driven by tourism. Interest in the city peaked after the 2018 release of “Crazy Rich Asians,” and continued to rise — to about 5 million visitors in the third quarter of 2019 — after Hong Kong’s anti-government protests. The recent outbreak of a new respiratory virus, however, is a reminder of how ephemeral such gains could be.

The virus, which originated in the central Chinese city of Wuhan, may or may not be a repeat of the deadly 2003 SARS epidemic, which hit Singapore hard. Yet it gives real-estate investors another reason to want their rents coming from a combined pool of retail and offices. That way, the profit available for distribution will become more future-proof — at least until artificial intelligence makes it unnecessary for humans to show up for work at all.

Nope. DBS, OCBC, MLT, tencent didn't even hit my price. No hit = no go.
DBS = $15.00
OCBC = $7.50
MLT = $1.05
Tencent $28x

JMH, FLT FCpT already hit my price but because I already have them decided to skip. Was waiting FLT at 0.60. Trying to lowball it.

At least at exactly 1 year milestone, ramjade is +9% on his cash by just sitting on it and do nothing   

But I am surprised even with a major crash of -30% in March, the price did not hit ramjade’s target. Ramjade, you are definitely too conservative (read : greedy)

As a friendly advice, like hensel said, you have to take a certain amount of risk in share investment. Otherwise, you are better off put your money into FDs and ASx or the like....Don’t waste your time monitoring the stock because you will never buy anything significant.

If you don’t buy in a major crash, take up this once in a life time opportunity, when else are you going to buy ? Aren’t you waiting for this all your life ? I can tell you there will not be another opportunity of this sort in the next 10-15 years....

From the portfolio, no doubt you are good in picking stocks. Beating the index by far. But what good is it if you yourself is not confident with what you pick ? From here clearly you have some soul searching to do....

It didn't crash enough. Reason. Look at oil crash in 2015. Dbs went to SGD15. So since Covid affected everything, SGD17-19 is still too expensive. Combine with zero interest rate, banks should fall more. Hope you get my point.

I don't care about index. What matters to me is dividend cash flow. Sometimes few 0.1x% differences I dont care.
See above. Dbs ocbc are not worth the current valuation.

To your sentence as bolded in the above, I used to think like you did BUT,... suddenly I realized a bank, or at least an SG bank does not make money solely from increasing interest rates. Speak harder and deeper with your private banker.

In 2015, returns of DBS were not as diversified as today, especially in wealth mgmt... your frame if reference is wrong. And secondly, compare the CET ratio in 2015 with today's,....

Like I said now is more or less entire industry affected. Bad loans will need to be write off. So the price does not reflect it yet. In my opinion. Hence I am not biting. I know about their wealth management. But majority of their menus till come from loans.

No private banker for Ikan bilis.
1. Dividend yield.
2. Quality reit. Can be A class or B class like aims.
3. 5-10 years worth of price range.

No private banker for Ikan bilis.
Even if qualified will never get one. Waste of good money.. That's why I shun priority banking. I can get all the perks of priority banking using IB. If talking about lounge, forget it. I don't do lounge. I packed my own sandwich for long flights.

slight OT but where do you get the above analysis?

this is a good read
https://www.forbes.com/sites/antoinegara/20...k/#5da8a117a1f0

Suntec just issued bonds at 3.68%, I recalled reading somewhere,...

The SG Govt helping SME tenants to pay rents for July and August, on top of the property tax rebates given out in Mar this year.

This is the 4th budget,.. called the Bajet 'Kekuatan',.... biggrin.gif

https://www.businesstimes.com.sg/government...to-offset-rents

Our dpu's for this year have hopes now,....
Cutloss on 50% of SPH REIT in holdings.

Total portfolio performance standing at 18.73% (green) now,....

Sian lah, most SG Reits price consistently go up. Guess no where to put my money already. Now just hold for div payment and patiently wait for another sale.

Look at the SG banks,... read-up on some forward PE infos,.. and dividend payout amts pre-Covid19. I think at today's level, there are still values in the SG banks.

RATINGS RATIONALE

"The affirmation of ESR-REIT's Baa3 issuer rating balances the trust's good liquidity position with its weak credit metrics," says Sweta Patodia, a Moody's Analyst.

The currently weak industry environment, brought about by the coronavirus outbreak, could lower rentals and necessitate rent waivers and deferments to ensure stable occupancy across the trust's asset portfolio.

This in turn will lower ESR-REIT's earnings and cash flows over the next 12-18 months. Moody's base case now assumes that the trust's cash flow from operations for 2020 will weaken significantly to around SGD90-95 million from SGD126 million last year.

"ESR-REIT has adequate liquidity to tide over temporary cash flow mismatches and also to meet its upcoming debt maturities," adds Patodia, who is also Moody's lead analyst for ESR-REIT.

As of 31 March 2020, the trust had SGD250 million of undrawn committed revolving credit facilities compared to SGD160 million of debt maturities over the next 12 months.

Increase in borrowings to fund cash flow shortfalls, however, would weaken the trust's leverage -- as measured by net debt/EBITDA -- to around 9.3x by December 2020 from 9.0x in December 2019.

Moody's expects net debt/EBITDA to recover to around 9.0x by December 2021 based on its assumption of a gradual recovery in economic fundamentals from the second half of 2020. However, should the virus outbreak continue for a prolonged period, it will delay the recovery in ESR-REIT's credit metrics.

ESR-REIT's Baa3 issuer rating reflects its: (1) portfolio of well-located industrial assets in Singapore, supported by a diversified tenant base; (2) track record of managing its assets; and (3) high degree of financial flexibility resulting from the high proportion of unencumbered assets in its portfolio.

At the same time, the rating is constrained by its (1) modest scale; and (2) increased appetite for growth through larger-scale acquisitions.

The stable outlook reflects Moody's expectation that ESR-REIT will improve its cash flow generation to restore its credit profile over the next 12-18 months.

ESG CONSIDERATIONS

In terms of environmental, social and governance (ESG) risks, ESR-REIT's ratings take into consideration the governance risks associated with the concentrated ownership at ESR Fund Management (S) Ltd (EFM) - ESR-REIT's manager. At the same time, the ratings also take into consideration the trust's aggressive inorganic growth strategy following the change in sponsor, which reflects its growing risk appetite. However, this risk is mitigated to some extent by the regulatory oversight provided by the Monetary Authority of Singapore (MAS) and exercised through the board, which consists of a balanced mix of independent and nonexecutive directors

Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Coronavirus led disruptions will weaken the trust's operating performance in 2020 but will be mitigated to some extent by its strong liquidity position.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's could upgrade the ratings if ESR-REIT (1) expands its asset size through organic growth or prudently funded acquisitions in developed markets; or (2) improves its credit profile, such that its adjusted net debt/EBITDA falls below 7.0x and adjusted EBITDA/interest coverage improves to above 4x on a sustained basis.

The maintenance of a long-dated debt maturity profile and access to committed funding will also be imperative for an upgrade.

Moody's could downgrade ESR-REIT's ratings if: (1) the operating environment deteriorates, leading to higher vacancy levels and lower operating cash flows; (2) there is a material change in its business profile resulting from its accelerated expansion into emerging cities with higher operating risks; and (3) its financial metrics deteriorate, such that adjusted net debt/EBITDA stays above 9.0x or adjusted EBITDA/interest coverage remains below 3x beyond December 2020.