Debt threat: CCT may need to scrounge up money for Golden Shoe's face lift

Its comfortable net gearing is very close to regulatory ceiling of 45%.

CapitaLand Commercial Trust (CCT) is finally redeveloping its Golden Shoe Car Park into a commercial building with 1m sf gross floor area (GFA), but with its aggregate leverage at 37.8%, Maybank KimEng believes it may need to raise more funds for this project.

"Debt headroom to a comfortable gearing level of 40% is just SGD0.3b. It may not be prudent to push too close to its regulatory limit of 45%," the research firm noted in a report.

Maybank KimEng views the redevelopment positively as it should allow CCT to capture a potential recovery in the office market when completed in 2021. If all approvals are granted, redevelopment will commence in 2H17.

However, the research firm cautions that project feasibility is still limited by the amount of differential premium (DP) payable to change the property’s use from transport to commercial. This will form the bulk of its development cost, it said.

Recall that SGD651m of the SGD1.3b cost to redevelop its former Market Street Carpark to CapitaGreen relates to DP and other land-related costs.