CapitaLand Mall Trust scrambles to lower rents to retain tenants

About 21% of its portfolio has an average reversion rate of -1.7%.

CapitaLand Mall Trust (CMT) has been trading off rental growth for occupancy rate in order to bring a sustainable cash flow. However, DBS Equity Research said it needs to steady its performance to deliver a stable distribution per unit (DPU) next year.

According to a report, 21% of the portfolio net leasable area (NLA) being renewed in 2017 has an average reversion rate of -1.7%.

The main drags in negative rental reversion came from Tampines Mall at -3.2%, Westgate at -10.2%, and Bedok Mall at -6.5%, albeit notable improvements have been seen from Junction 8 at +2.6%, IMM at +1.1%, and Bugis Junction at 1.7%.

DBS Equity Research said CMT has the performance of Plaza Singapura, Tampines Mall, Raffles City, and Bedok Mall need to be held steady.

The four contribute close to 30% of CMT’s net income from all investments.

DBS analyst Derek Tan said, "These four properties have kept their almost full occupancy at the expense of soft or negative rental reversions this year."

Looking at other properties, IMM Building continued to be strong but is considered insufficient to cushion the income pressure.

Disappointing performance from Bukit Panjang Plaza and Westgate is projected to continue. However, investors are encouraged not pay undue attention to these two properties as they only contribute 2.4% and 2% respectively to CMT’s net income.