Page 8 - ar2011

Lette

Unith

DEAR UNITHOLDERS

CapitaCommercial Trust recorded a distributable income

of S$212.8 million for the year ended 31 December

2011 (FY 2011). Distribution per unit for the year was

7.52 cents, due to lower revenue following the sales of

Robinson Point and StarHub Centre in 2010, and the

closure of Market Street Car Park for redevelopment in

2011. Some new leases and renewals which we signed

above or in line with current rates were however at rates

lower than those which they replaced. These had been

signed in 2008 when rates were at peak levels.

While market sentiment rose towards the end of 2010,

and rentals began to strengthen, they were from August

2011 affected by the Euro zone debt crisis. Monthly

market rentals for Grade A offices averaged S$11.00

per square foot in the fourth quarter of 2011 – a 0.5%

quarter-on-quarter decline, notwithstanding a year-on-

year increase of 11.1%. The net absorption of ofce space

in Singapore’s central business district (CBD) was about

two million square feet for 2011, but of this only 78,000

square feet were taken up in the fourth quarter.

The board of directors and management remain focused

on ensuring the Trust’s resilience in times of adversity,

on driving steady returns through proven strategies and

on building a strong portfolio for sustainable long-term

success. Continuing portfolio reconstitution, prudent

capital management, coupled with proactive leasing and

ongoing asset enhancements will help us to meet any new

challenges that may arise.

Building For Growth

We continue to reconstitute and increase our assets. In

April 2011 we took the decision to redevelop Market Street

Car Park into a Grade A office tower. The immediate

enhancement in the site’s land and asset value due to the

redevelopment decision validates our strategy.

As the Trust’s development activities are subject to

a regulatory limit of 10.0% of its total asset size, we

obtained support from our sponsor, CapitaLand Limited

(CapitaLand), and Mitsubishi Estate Asia (MEA) to

undertake this S$1.4 billion project. Under the joint

venture agreement, the Trust holds a 40.0% stake – the

maximum amount within its development limits – while

CapitaLand and MEA hold 50.0% and 10.0% respectively.

In addition, we have an option to buy back the 60.0%

interest at market valuation within three years upon the

receipt of temporary occupation permit for the project.

Named CapitaGreen, the new Market Street ofce tower

designed by the internationally acclaimed architect,

Toyo Ito, is on track for completion in the fourth quarter

of 2014.

More recently, on 22 February 2012, we announced

our proposed acquisition of Twenty Anson, a two-year

old prime office building for a price of S$430.0 million

or S$2,121 per square foot on net lettable area. The

acquisition is expected to generate an increase in pro

forma annualised distribution per unit of 0.36 cents.

Given that its average committed rentals are significantly

below current market levels there is upside potential.

Upon completion of the acquisition, the Trust’s asset size

will be S$6.9 billion.

Building a Strong Balance Sheet

We have a prudent capital management strategy and a

proactive approach to securing funds in order to refinance

borrowings well ahead of maturity. In June 2011, together

with CapitaMall Trust, we successfully completed the

refinancing of Rafes City Singapore’s S$964.0 million

commercial mortgage-backed securities and secured

revolving credit facility, although it was only due for

repayment in September.

In December 2011, we obtained committed unsecured

facilities of S$450.0 million and issued S$200.0 million

in medium term notes (MTN), raising an aggregate of

S$650.0 million – more than sufcient to refinance the

S$570.0 million term loan due in March 2012. With seven

(out of nine) Grade A assets valued at approximately

S$4 billion unencumbered af ter the refinancing in

March 2012, the financial flexibility of the Trust will have

been enhanced.

We will continue to obtain funding from diversified

sources so as to lower the cost of our debt and reduce

reliance on any single source. We will manage the debt

portfolio to optimise extending the maturity profile

whilst not compromising the lower cost of borrowing.

Letter to

Unitholders

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