A brief note from what I gather in a recent RHB sell report on Capitaland Commercial Trust, the old girl in Singapore Office REIT.
This gives some idea of the challenging rent renewal and demand for offices:
CCT’s portfolio occupancy inched up to c.97%, while the REIT manager observed shrinking demand from the financial sector. Additionally, leasing proved to be difficult for its CapitaGreen asset as its occupancy inched up marginally to 91% with lower committed rental rates inked by new tenants. Lastly, valuers’ cap rates across CCT’s portfolio remained largely unchanged, as the REIT registered 1.6% YoY higher portfolio valuation.
The saving grace for them is that most of the rentals are committed!
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Choon Yuan
Saturday 23rd of January 2016
HI,
What is your opnion of CCT's valuer reducing the discount rates for the office properties (7.5% to 7.25%) which helped to justify fair value gains. Do you think it is right?
Kyith
Sunday 24th of January 2016
its hard to say. there is no right or wrong. my friend cite suntec and fortune have the biggest discount to nav. but do you think the market trust the nav and the cap rate used for the nav? if you use a lower discount rate it is thtat inflation scenario in the future is going to be much less. i think that is not safe. a rule of thumb is always to use either 8% for conservative companies, 10% for neutral and 12% for aggressive companies. is it sound to use these 3 benchmarks? perhaps not, but u are sure ur valuations will not always be too optimistic.
when it comes to CCT what they do we have no control but thanks for this question. it was a good spot. i can see you are looking very deep into this. kudos