During a results briefing on Jan 21, Tony Tan, CEO of the manager of CapitaLand Integrated Commercial Trust (CICT), laid out in no uncertain terms the challenges faced by Singapore’s largest REIT. Formed from a merger completed in October last year, CICT has few rivals. With a market cap of $14 billion and an asset size of $22.3 billion, it is the largest REIT in Asia-Pacific excluding Link REIT.

In the short term, Tan would like CICT’s financial ratios to improve. However, its gearing as at Dec 31, 2020, shot up to 40.6% from 34.4% as at Sept 30, 2020, prior to the merger. This was partially blamed on $1 billion in debt that CapitaLand Mall Trust took on to complete the merger.

Then, because the merger caused debt levels to rise, the net debt/Ebitda (earnings before interest tax, depreciation and amortisation) rose to the low teens, and interest cover ratio fell to 3.8 times from four times as at Sept 30. “Ideally, we would like to defend our A3 credit rating. We will find opportunities to lower gearing. Ideally we want to bring it down below 40%. This may include portfolio reconstitution and we may monetise assets we may not want to hold in the long term,” Tan says.

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