SINGAPORE (Aug 5): In early 2017, I bought some units in CapitaLand Commercial Trust to ride the tightening supply of top-end office space in Singapore. Even though stocks were rising, there was a fair amount of nervousness in the market. But I figured I would still earn a decent yield from CCT amid the volatility.

As it happened, the real estate investment trust (REIT), which owns properties such as Capital Tower, CapitaGreen and Six Battery Road, proved to be a really good investment. Over the last 2½ years, it paid out copious amounts of cash while the market price of its units soared. But CCT is now looking expensive, in my view. It reported a distribution per unit (DPU) of 8.7 cents for 2018, and 4.4 cents for 1H2019. So, when its units closed at a high of $2.30 on July 5, they would have been trading at a yield of less than 4%.

Unfortunately, I missed that opportunity to sell, and the market price of units in CCT has since fallen. Part of the recent decline in CCT could be attributed to its units trading ex for distributions totalling more than five cents per unit. More importantly, some investors might be realising that they face heightened risk of being diluted, as CCT’s currently healthy market valuation provides its manager with an opportunity to pursue a more intensive pace of acquisitions and capital-raising activity.

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