SINGAPORE (July 9): CapitaLand Commercial Trust’s share price has fallen 17% since the start of the year, significantly underperforming the FTSE ST Real Estate Investment Trust Index, which is down less than 7%. Office real estate investment trusts in general are down around 10%. 

Part of the reason for CCT’s underperformance was the acquisition of Galileo, an office building in Frankfurt’s CBD. The move sent CCT’s gearing ratio up to 39%, and the accretion to distribution per unit (DPU) based on pro forma numbers was just 1.4%. On July 2, CCT announced that it was selling Twenty Anson for $516 million, or a capitalisation rate of 2.7%. The sale price is 20% above the purchase price of $430 million and will lower the REIT’s leverage to 35.9%. For 1QFY2018, Twenty Anson contributed 3% to total net property income. Although the divestment could lead to lower NPI, this should be offset largely by interest savings from debt repayment and lower asset management fees. 

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