Cambridge REIT's property income inches up 9% to S$19.2m

Even topline went up.

According to a release, Cambridge REIT (CREIT) reported 9% y-o-y rises for both topline and net property income to S$22.5m and S$19.2m respectively.

Growth was largely attributable to the additional income from the acquisition of 4 properties compared to 3Q11, rental escalations and higher reversions from its multi-tenanted properties.

Portfolio occupancy remained high at 99.4% (vs 99.1% in 1Q12). This more than offset the loss of income from its divestments over the same period. Distributable income rose 13% y-o-y to S$14.5m (inclusive of S$0.8m of capital distribution), translating to a DPU of 1.204 Scts (+11% y-o-y).

Acquisitions and AEIs to contribute in coming quarters. CREIT’s organic growth performance is likely to remain stable. While c.28% of its income will be up for renewal in 2012 (of which 14% is from single tenanted buildings), the manager is expecting a majority of the single tenants to extend their leases, based on current negotiations with their respective vendors and should see reversions of c5%.

Further growth is likely to come from its acquisition activities YTD (CREIT acquired close to S$228m of assets in total YTD) and in this results release announced another
acquisition – 54 Serangoon North Ave 4 at a total consideration of S$21m (or S$151 psf GFA).

The property, while well located in Central Singapore, is understood to be under-rented with an occupancy of only 73% (average passing rent of S$1.80 vs S$2.20 spot rent) and we understand that management’s strategy is lease it up to 100% by the end of 2012. Initial yield of 5.5% is estimated to rise to 8% once that happens.

Further acquisitions likely to compensate for SLA’s compulsory acquisition of 2 properties in 1Q13. With the 2 properties expected to be compulsorily acquired by SLA in Jan13, the manager has been active in its search for alternative replacement assets in order to compensate for the expected loss of rental income.

Moreover, CREIT has obtained an ex-gratia payment of close to S$4m, which can be used to compensate for any income vacuum from the sale of the above 2 properties.