C A M B R I D G E I N D U S T R I A L T R U S T
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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S JOINT MESSAGE
LETTER TO UNITHOLDERS
property fundamentals. Portfolio occupancy remained
stable with an average security deposit equivalent to 8.8
months of rent. CIT’s top ten tenants accounted for 35.1%
of the rental income, down from 37.3% a year ago. The
weighted average lease expiry (“WALE”) remains healthy
at 3.8 years.
Our focus on maintaining a robust capital management
strategy was one of the highlights in FY2015. In the light
of potential interest rate volatility due to the impending
cessation of the US Federal Reserve’s quantitative easing
programme, the Manager implemented measures to
minimise CIT’s exposure to interest rates and ensure
that future distributions to Unitholders would not be
materially impacted. As a result of these efforts, as at
31 December 2015, almost 98% of CIT’s interest rate
exposure was fixed for the next three years.
We also refinanced CIT’s $250 million Club Loan Facility,
using the proceeds from the MTN programme and a
new unsecured bilateral loan facility. Following this
refinancing, the unencumbered investment properties
in CIT’s portfolio are in excess of $1.1 billion. With
approximately 80% of assets free from any mortgages
to banks, CIT is able to enjoy financial flexibility that
is favourably viewed by investors and rating agencies
alike, obtaining BBB- rating by S&P and Baa3 rating by
Moody’s.
As a result of our proactive capital management, in FY2015
the Manager was recognised as the Highly Commended
Winner for Best Financing Solution at the Adam Smith
Asia Awards 2015, organised by Treasury Today Asia.
Operations
The Manager continued to execute its strategy around
key areas identified in the 2014 comprehensive strategic
review of operations. We also actively managed the
conversion of three properties from single-tenanted
(including master-leased) to multi-tenanted, bringing our
number of tenants to 187. All these initiatives significantly
diversified our tenant mix and lessened the impact on
CIT’s portfolio from any single tenant.
During the year CIT acquired assets for a total consideration
of $27.2 million. Our AEIs continued with the completion of
3 Pioneer Sector 3 (Phase II), 21B Senoko Loop (Phase I)
and 31 Changi South Avenue 2. A number of additional
properties are under review for AEIs in FY2016.
Performance Fees
Under the terms of the original CIT Trust Deed, the
Manager was entitled to charge a performance fee
if CIT’s performance exceeded the performance of
an index of Singapore REITs over the same period. At
previous Annual General Meetings and various other
forums, Unitholders had expressed concern that this
formula for calculating performance fees was complex,
difficult to understand and not necessarily transparent.
At an Extraordinary General Meeting (“EGM”) held in
2015, the Manager addressed Unitholders’ concerns
by proposing two resolutions that changed the way in
which performance fees were calculated to the benefit
of Unitholders. The first resolution was passed as an
extraordinary resolution and now the performance fee
calculation will be based on the widely accepted DPU
growth model. The second extraordinary resolution
sought to amend the formula for calculating the issue
price of units issued in lieu of cash payment of any
performance fee and to align it with market practice. As
Unitholders did not support this proposed change, any
units that would be issued in future as payment of any
performance fee will likely be issued based on the gross
asset value of CIT.
Corporate Social Responsibility and Sustainability
The Manager recognises that the business and operations
of CIT have a long-term impact on the environment
and the community. We also believe that focusing on
sustainability is not only the right thing to do but it also
benefits our business in the long term. One ongoing
sustainability initiative that we have focused on is
installing solar panels on our properties. To date we have
eight properties with solar installations that produced
a total of 741.25 MWh of power in 2015. All our team
members have also been actively involved in improving
the lives of the underprivileged through a series of
outreach programmes such as Children’s Wishing Well,
in partnership with the Student Advisory Centre.
We are pleased to release our very first sustainability
report in 2016, which will only be available in electronic
form on our website, in keeping with our sustainability and
green efforts.
Outlook for FY2016
Figures released by the Ministry of Trade and Industry
(“MTI”) in February 2015 illustrated that Singapore’s
economy grew modestly 2.1% y-o-y in FY2015. Economic
growth is expected to come from domestically-oriented
sectors such as business services sectors. Subdued
global economic conditions and prolonged weakness
in commodity prices are expected to continue to weigh
on the manufacturing sector. MTI expects Singapore’s
economy to grow by 1.0% to 3.0% in 2016.
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