Rental pressures ahead for Cambridge Industrial Trust

Tenants are likely to drive harder bargains on rents this year - a period when a significant portion of leases are up for renewal, the manager of Cambridge Industrial Trust (CIT) said yesterday.

It stated: "Pressures on rental terms are expected due to the softer economic environment."

About 22 per cent of its leases by rental revenue are up for renewal in the next 12 months, including eight single-tenanted buildings. The manager expects to convert one of these to multi-tenancy, renew or enter into new leases for four of the properties, redevelop one and divest two.

"The conversion of properties from single tenancy to multi-tenancy is expected to continue to have a negative impact on portfolio occupancy and net property income during 2016," it said as it released fourth-quarter results yesterday.

CIT posted a 9 per cent drop in distribution per unit (DPU) to 1.139 cents for the three months to Dec 31 on the back of a 7.2 per cent fall in distributable amount to $14.8 million.

DPU was down 4.2 per cent to 4.793 cents for the year, while the distributable amount fell 1.9 per cent to $61.8 million.

The lower DPU is mainly due to reduced capital distributions from the year before, Mr Philip Levinson, chief executive of the Reit manager, said in a conference call.

Net property income was up 10.7 per cent to $21.6 million for the quarter, and ahead 10.7 per cent to $86.2 million for the year.

Gross revenue rose 8.7 per cent to $28.5 million for the quarter and 13 per cent to $112.2 million for the year.

Its portfolio occupancy rate was 94.3 per cent as at Dec 31, down from 96 per cent a year earlier.

The firm posted a positive rental reversion of 9.1 per cent for the year - "an extraordinary result in such a tough market", said Mr Levinson.

Its weighted average lease expiry was 3.8 years as at Dec 31, compared to four years a year earlier.

The manager said yesterday that it will conduct a strategic review of its business and operations.

"We continue to examine our options... looking at what options are available to a Reit of CIT's size in the market today," said Mr Levinson.

CIT's manager is indirectly owned by National Australia Bank (NAB), Oxley and Mitsui & Co. CIT said in October that NAB and Oxley had received non-binding expressions of interest for their combined 80 per cent stake in the manager, and the two were considering the offers.

Net asset value per unit was 67.3 cents at Dec 31, down from 68.1 cents a year earlier.

CIT units closed down two cents at 53 cents yesterday.

Rennie Whang

A version of this article appeared in the print edition of The Straits Times on January 15, 2016, with the headline 'Rental pressures ahead for Cambridge Industrial Trust'. Print Edition | Subscribe