Our Commitments
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Building On Our Commitments Annual Report 2011 Mission and Vision Cambridge Industrial Trust is firmly committed to providing its Unitholders with a stable and secure income stream, with the aim of delivering long-term capital growth, through pro-active management of its property portfolio. © Cambridge Industrial Trust 2011. Material from this annual report must not be reproduced without prior permission of the publisher. Information correct at time of going to press. Annual Report Cambridge 1 2011 Industrial Trust Corporate Information Cambridge Industrial Trust (”CIT“) is a Singapore-based industrial REIT, principally investing directly or indirectly in income-producing real estate and real estate related assets in Singapore used primarily for industrial, warehousing and logistics purposes. CIT was constituted on 31 March 2006 under a trust deed (as amended), entered into between the CIT Manager (”CITM“) and the CIT Trustee. CIT was officially listed on the Mainboard of the SGX-ST on 25 July 2006 (the “Listing Date”) and has a market capitalisation of S$564.8 million as at 31 December 2011. Since the Listing Date, CIT has grown its initial portfolio of 27 properties to a portfolio comprising 45 properties (”the Properties“) and 2 built-to-suit (”BTS“) projects at a total book value of S$1,027.2 million as at 31 December 2011. The Properties serve tenants in diverse trade sectors covering logistics, warehousing, industrial, car showroom, light industrial and self storage. Many of these Properties are located in close proximity to strategic infrastructure and amenities, public transportation and major highways within Singapore. As at 31 December 2011, the Properties comprised approximately 657,777 square metres of net lettable area, leased to 161 tenants. CIT has a credit rating of “BBB-/Stable/--” which was assigned by Standard & Poor’s on 27 August 2009 and reaffirmed on 1 June 2011. The investment strategy of CIT is in accordance with the following guidelines: • Investment portfolio will primarily comprise real estate used mainly for industrial purposes (including investments in real estate related assets and/or other related value enhancing assets or instruments); • Investments will be made in Singapore and Asian markets depending on investment opportunities and market conditions; and • Investments will generally be for the long-term. The key objectives of CIT are to deliver secure and stable distributions to Unitholders and to achieve long-term growth in net asset value per unit in order to provide Unitholders with a competitive rate of return for their investment. CIT’s strategies to achieve these objectives include: • Pro-actively managing CIT’s property portfolio to maximise returns; • Selectively acquiring properties that meet the CIT Manager’s investment criteria; and • Prudent capital and risk management strategies that enhance Unitholders’ value. Contents 4 Chairman’s & CEO’s Letter to Unitholders 30 Property Portfolio 7 Financial Highlights 46 Singapore Industrial Property 8 Significant Events 59 Corporate Governance 12 Manager’s Report 67 Corporate Social Responsibility 17 Investor Relations 68 Corporate Directory 20 Board of Directors 69 Financial Statements 22 Structure of Cambridge Industrial Trust 127 Additional Information 24 Management Team 129 Statistics of Unitholders 28 Property Locations 2 Cambridge Annual Report Industrial Trust 2011 Commitment to Excellence Annual Report Cambridge 3 2011 Industrial Trust The Manager is committed to delivering strong financial performance and generating consistent returns for CIT’s Unitholders. 4 Cambridge Annual Report Industrial Trust 2011 Dr Chua Yong Hai Independent Chairman Chris Calvert Chief Executive Officer and Executive Director Annual Report Cambridge 5 2011 Industrial Trust Chairman’s & CEO’s letter to unitholders In 2011, the Manager continued to “focus on its core strategies of prudent capital and risk management, acquiring value adding assets and proactively managing its existing pool of assets. ” Dear Unitholders Overview of FY2011 FY2011 was a positive year for Cambridge Industrial Trust acquiring land under the Land Acquisition Act (”Act“) which (“CIT”). The equity markets were more vibrant in the first half mainly affects two of the Trust’s properties. The value of the of the year, before slowing down in the second half on the affected properties comprises approximately 9.9% of the Trust’s back of concerns that the European sovereign debt crisis portfolio book value as at 31 December 2011 and the Trust is would deteriorate further and limited evidence that the US entitled to market compensation under the terms of the Act. economy was recovering. Markets became increasingly volatile The acquisition of the land is expected to be completed in amidst poorer liquidity. January 2013. The Manager will take proactive measures to effectively redeploy the compensation received including the In 2011, the Manager continued to focus on its core strategies acquisition of yield-accretive assets for the Trust’s portfolio. of prudent capital and risk management, acquiring value adding assets and proactively managing its existing pool of assets. CIT In capital and risk management, several initiatives were completed the acquisition of three new assets and commenced undertaken to strengthen the Trust’s balance sheet whilst the construction of two built-to-suit (“BTS”) projects. These maintaining financial flexibility. These included the completion of projects are targeted to complete in the second half of 2012. refinancing with a new S$320 million term loan signed in June Proactive asset management initiatives implemented by the 2011, divestment of several non-core assets and ultilisation Manager in the year resulted in several lease extensions and of net proceeds to retire debt. These initiatives contributed new leases being signed. This reduced lease concentration to a lower all-in interest cost of 4.1% per annum and reduced risk and contributed positively to smoothing the rolling lease the Trust’s gearing ratio to 33.1%. In June 2011, Standard & expiry profile and diversifying the tenant base. Poor’s reaffirmed CIT’s BBB-/Stable Rating. The Manager also commenced asset enhancement works Delivering Steady Performance in FY2011 on three assets which, upon completion, will improve the quality of these assets and also generate additional income CIT delivered another year of stable financial results in FY2011. for the Trust. This is consistent with the Manager’s objective Gross revenue was S$80.4 million, an increase of 8.3% over of providing Unitholders with a stable and secure income that of FY2010. Furthermore, Net Property Income was S$69.1 stream and increasing the net tangible asset (“NTA”) value million in FY2011, a 6.2% increase from FY2010. Distributable of their units. Income gained 12.7% from the previous financial year to S$50.4 million in FY2011. Distribution per unit reduced 13.4% On 11 January 2011 and on 10 February 2012 the Singapore to 4.237 cents, principally due to the increased issuance of Land Authority (”SLA“) notified the Manager that they will be units from the rights issue and the unscheduled delay in 6 Cambridge Annual Report Industrial Trust 2011 Chairman’s & CEO’s letter to unitholders (continued) completing some of the announced acquisitions. Based on at attractive valuations in Singapore, and may also consider the closing price of S$0.475 per unit as at 31 December 2011, acquiring assets in other Asian countries, subject to investment CIT units were yielding 8.9%. opportunities and market conditions. This is designed to further diversify CIT’s property portfolio and tenant base. As at 31 December 2011, CIT’s portfolio was revalued upwards by 10.2% from a year earlier to S$1.023 billion by Colliers In addition, the Manager will continue with its strategy of International Consultancy and Valuation, increasing the net implementing asset enhancement initiatives and active lease asset value (“NAV”) per unit to 62.0 cents. management to increase the intrinsic value of CIT’s asset base, improve the quality and stability of the Trust’s rental income, The Trust’s underlying property fundamentals remained resilient reduce tenant concentration risk, and extend the lease expiry throughout FY2011. The portfolio occupancy remained high at profile of the tenant base. 98.5% and the weighted average lease expiry was maintained above three years. Rental arrears were minimal, trending at Note of Appreciation around 0.6% of annualised rent. We were very pleased to note that many of our Unitholders Profitable and Socially Responsible attended the inaugural Annual General Meeting (“AGM”) last year. The questions and feedback that were raised at the meeting Besides delivering strong financial performance and generating have provided us with invaluable information and ideas to take consistent returns for CIT’s Unitholders, corporate social the Trust forward. We again look forward to receiving our responsibility continues to be an important matter for the Unitholders and having their active participation at the AGM Manager. to be held on 20 April 2012. Indeed our Unitholders’ support and understanding over the years is sincerely appreciated. During FY2011, the Manager continued to support community programmes such as the Habitat for Humanity. Donations were Special thanks also go to our Trustee, as well as our strategic made to Sunrise Children’s Villages in Cambodia and Marymount partners, lenders and tenants for their continued support over Centre in Singapore, a voluntary welfare organisation set up the year, and to Mr. John Charles Wood who stepped down as by the Good Shepherd sisters. Support will continue to be a board director on 31 October 2011 for his contributions and given to meaningful community programmes and charitable guidance to the Trust. Finally, the dedication, hard work and causes which are in line with our commitment to help those professionalism of the board of directors and the management less fortunate. and staff, which are so critical to the success of CIT, are also well appreciated. Outlook for 2012 In 2011, Singapore’s economy expanded by 4.9%.