Letter to Unitholders

Mr. Soo Kok Leng - Lynette Leong Chin Yee

(Left) Soo Kok Leng, Chairman
(Right) Kevin Chee Tien Jin, Chief Executive Officer

We are pleased to report higher distributable income of S$321.7 million for FY 2018, a 11.4% increase year-on-year. Distribution per unit was 8.70 cents, 0.5% higher than 8.66 cents a year ago.
Summary of Message
  • FY 2018 distributable income rose 11.4% YoY to S$321.7 million
  • Portfolio reconstitution with acquisition of Gallileo* and divestment of Twenty Anson
  • Capturing growth opportunities in gateway cities of developed markets while remaining predominantly Singapore-focused
  • Proactive and prudent capital management to optimise tenure and manage funding costs
  • Continue to focus on value creation for longterm sustainable returns

* CCT acquired 94.9% interest in Gallileo.

Dear Unitholders,

We are pleased to report another positive year for CCT, achieved through our unwavering focus on value creation. Taking strides to shape our future, we improved our portfolio's committed occupancy rate, broke ground for the redevelopment of Golden Shoe Car Park – now known as CapitaSpring and acquired Gallileo, a freehold Grade A office property in Frankfurt, Germany. The latter two actions will provide the Trust with new engines of growth. We also sold Twenty Anson at a premium over its book value and utilised the divestment proceeds to pare down borrowings and lower CCT’s aggregate leverage. With the Trust’s enhanced financial flexibility, we will be able to better optimise and grow our portfolio.


We are pleased to report higher distributable income of S$321.7 million for FY 2018, a 11.4% increase year-on-year (YoY). Distribution per Unit was 8.70 cents, 0.5% higher than 8.66 cents a year ago. Gross revenue and net property income for the year rose by 16.7% and 18.5% YoY respectively. The strong performance was mainly due to the strategic acquisitions and divestments completed over the last two years.

As at 31 December 2018, CCT’s total deposited property value was S$11.2 billion, 4.0% above the deposited property value of S$10.8 billion as at 31 December 2017. Its adjusted net asset value per Unit (excluding distributable income payable to Unitholders) was 3.4% higher at S$1.80 from S$1.74 a year ago.

We attribute these positive results and virtuous cycles achieved over the years to the strong support of Unitholders for CCT’s vision and effective strategies executed by our dedicated teams. These are strategies that involve a disciplined approach to managing CCT’s portfolio of quality assets, timely decisions to acquire, divest and develop properties to maximise the Trust’s income, and underpinned by prudent and proactive capital management. These are sound business fundamentals that have carried us through since our listing in 2004.


The acquisition of a 94.9% interest in Gallileo in Frankfurt, Germany for an agreed property value of EUR337.8 million (approximately S$531.3 million1) and at a net property income yield of 4.0% was a strategic move by CCT to deliver on its promise to create sustainable, long-term value for its Unitholders. Having grown over the years to become the largest office landlord in Singapore’s Central Business District (CBD) by net lettable area (NLA), CCT looked for new growth horizons and invested in Germany, one of the world’s largest economies, leveraging our sponsor, CapitaLand Group’s expertise and network.

Gallileo offers a good strategic fit as a stable asset with an established anchor tenant on a long-term lease. Foreign exchange risk was mitigated as the investment was funded primarily through borrowings in Euros, while its property income continues to be hedged on a rolling four quarters basis.

With the inclusion of Gallileo, CCT’s portfolio property value has increased to S$10.6 billion as at 31 December 2018 from S$9.9 billion2 a year ago, with a 5% exposure to Germany. CCT looks to allocate up to 20% of our portfolio property value overseas while remaining predominantly focused in Singapore.

In Singapore, our integrated development on Market Street broke ground in February 2018 and is on track to be completed in 1H 2021. We chose the name “CapitaSpring” to capture its vantage as the epicentre where ideas spring forth and to emote the lushness of the building’s iconic green oasis. To provide a longer term growth pipeline, CCT has a call option to acquire the commercial component of CapitaSpring from our joint venture partners within five years of receipt of Temporary Occupation Permit.

The divestment of Twenty Anson is another clear example of our strategy to unlock value from properties that have reached an optimal stage of their life cycle. The sale consideration of S$516.0 million was 19.2% above the property’s 31 December 2017 valuation of S$433.0 million, and 20.0% higher than CCT’s property price of S$430.0 million in 2012.


The success of our portfolio management and reconstitution strategy is underpinned by proactive and prudent capital management. In 2018, in view of the expected uptrend in interest rates, the Trust concluded total debt financing of S$2.2 billion. This included the refinancing of S$1.1 billion of bank facilities due in 2019 with longer-tenure borrowings maturing from 2022 to 2025.


For the acquisition of the Trust’s 94.9% interest in Gallileo Property S.a.r.l. which holds Gallileo, the Trust raised gross equity proceeds of S$217.9 million through a private placement and obtained an aggregate of EUR341.6 million of fixed rate bank loans with tenures of five and seven years. The total funds raised were used to acquire Gallileo and refinance existing Singapore dollar bank borrowings. In addition, following the divestment of Twenty Anson, S$500.0 million was used to pre-pay existing higher interest rate Singapore dollar borrowings.

These activities strengthened the financial position of the Trust - CCT's aggregate leverage was lowered to 34.9% as at 31 December 2018 (37.3% as at 31 December 2017), comfortably below the regulatory limit of 45.0%; weighted average term to maturity was extended to 3.9 years, an improvement from 2.4 years at the end of FY 2017; and the weighted average cost of debt remained at 2.6%, notwithstanding higher market interest rates.


The Trust manages its leasing risks through forward lease renewals and proactive tenant retention. In FY 2018, approximately one million square feet (sq ft) of new and renewal leases were signed, of which 22% were new. Significantly, we retained our long standing tenant, J.P. Morgan within our portfolio, signing them on as our first tenant at CapitaSpring for 24.0% of the office NLA. Over at 21 Collyer Quay (HSBC Building), HSBC extended its lease to April 2020, at a total annual rent of S$27.7 million representing a 35.0% increase in rent for the property.

Since acquiring Asia Square Tower 2 in November 2017, we have ramped up its committed occupancy to 98.1% as at end 2018, compared to 90.5% a year ago. Office space at both Asia Square Tower 2 and Capital Tower were leased at market rents to a joint venture between CapitaLand and The Work Project, to offer flexible space solutions. The initiative is part of CapitaLand’s ‘office of the future’ ecosystem aimed at meeting evolving workspace needs through an integrated offering of conventional office (core) and flexible workspace (flex) that are tech-enabled and community driven.

As at end 2018, the Trust’s committed occupancy for the Singapore portfolio was 99.3%, well above the market occupancy level of 94.8%. The committed portfolio occupancy for Singapore and Germany was 99.4%.

Other operational highlights include the completion of a S$54.0 million refurbishment programme at Raffles City Singapore in March 2018 that has rejuvenated and enhanced the shopping experience at the mall.


Singapore’s average monthly Grade A office rent has risen by 14.9% from S$9.40 per sq ft as at end 2017 to S$10.80 per sq ft as at end 2018 according to CBRE. Property consultants expect Grade A office rentals to grow by 8% to 10% in 2019 given the limited supply pipeline in Singapore’s CBD. This will close the gap between expiring and new and renewal rents to be committed for leases expiring in 2019 and drive more positive rental reversions for CCT in the year ahead.

Bugis Village will be returned to the State on 1 April 2019 and CCT will receive a compensation sum of S$40.7 million. Subsequent to that, CCT signed a one-year lease with the State to manage the property from April 2019 to March 2020 with a projected net income of S$1.0 million.

On the investment front, we will continue to explore opportunities in Singapore and Germany, capturing growth opportunities in gateway cities of developed markets while remaining predominantly Singapore focused.

We are closely monitoring the global political and macroeconomic environment and are cognisant of potential risks that may stem from ongoing trade disputes and the knock-on dampening effect on the global economy. In line with our Enterprise Risk Management Framework, we will proactively assess and mitigate these risks accordingly.


We continue to engage our stakeholders actively with signature events organised throughout the year to foster closer relationships with our tenants and create vibrant communities. The inaugural Wellness Week 2018 was an initiative to encourage fitness and personal well-being in the workplace. Over 400 tenant participants joined the community activities held in the last week of July 2018.

In partnership with Rainbow Centre Singapore, the wishes of 779 students from two schools were fulfilled through CCT Gifts of Joy 2018. Close to 300 CapitaLand employees and CCT tenants volunteered time to wrap and distribute gifts and enjoyed art jamming sessions with the students. S$16,550 was raised for Rainbow Centre through the event, with CapitaLand Hope Foundation donating S$10 for every fulfilled wish or volunteer hour or completed art canvas.

Catering to a younger and increasingly tech-savvy tenant base, the pilot CapitaStar@Work mobile application was introduced. This application enables CCT’s Singapore office community to register for events, connect with each other and access building amenities in the future.


Key accolades garnered by CCT in FY 2018 included the following:

  • Singapore Corporate Awards – Best Annual Report (Gold) under the REITS and Business Trusts category;
  • Securities Investors Association (Singapore) 19th Investors’ Choice Awards – Shareholder Communication Excellence Award (Runner-up) under the REITs and Business Trust category;
  • Governance Index for Trusts (GIFT) – ranked joint first place under the REIT and Business Trust category, with a total score of 79.0;
  • Singapore Governance and Transparency Index by the Centre for Governance, Institutions and Organisations, NUS Business School – ranked second place under the REIT and Business Trust category, with a total score of 95.7.


We take this opportunity to thank our fellow Directors, and in particular, our Deputy Chairman and Non-Executive Non-Independent Director, Mr Lim Ming Yan, who retired on 1 July 2018 after having served on the CCT Board since January 2013. We are indeed grateful to Ming Yan for his invaluable contributions and guidance in our endeavours to grow CCT to its fullest potential.

We would also like to thank the CCT team for their hard work and dedication as well as our tenants and partners for their continuous support. Last but not least, we are especially grateful to our Unitholders for their trust in our stewardship of CCT.

Soo Kok Leng

Kevin Chee Tien Jin
Chief Executive Officer

15 February 2019

  1. Singapore dollar amount for reference only, based on an exchange rate of EUR1 to S$1.5728 as at 19 June 2018.
  2. Excluding Twenty Anson, which was divested on 29 August 2018, and Bugis Village, which is reclassified under "Asset Held for Sale".