CapitaCommercial Trust property, Capital Tower, in the heart of Singapore's CBD.CapitaCommercial Trust property, Capital Tower, in the heart of Singapore's CBD.

Ratings agency Moody’s has upgraded Singapore-listed office REIT, CapitaCommercial Trust's (CCT’s) (SGX:C61U) issuer rating from Baa1 to A3.

In explaining the rationale for the upgrade, Moody’s cited CCT’s strong market position, successful leasing trends, healthy operating performance and financial profile.

"CCT is a major office landlord that has successfully enhanced the value and competitiveness of its older properties, Raffles City Singapore, Six Battery Road and Capital Tower through asset enhancement initiatives, and also redeveloped its former Market Street Car Park into CapitaGreen," says Jacintha Poh, a Moody's Assistant Vice President and Analyst.

As of 31 December 2014, CapitaGreen had a committed occupancy rate of 69.3%, with over 90% of its lease expiring in 2019 and beyond.

"CCT has also demonstrated a good track record of active lease management, renewing its leases ahead of expiry and maintaining a well-spread lease expiry profile. This strategy has supported a committed portfolio occupancy rate of consistently above 90% since listing in 2004, in turn providing for greater income stability and visibility," adds Poh, who is also Moody’s lead analyst for CCT.

The agency opines that CCT's strong financial profile provides the REIT with headroom to make debt-funded acquisitions for future growth, yet remain within its current rating level. Although Moody's estimates the trust to have sufficient capacity to acquire the remaining 60%-interest in CapitaGreen on a fully debt-funded basis, CCT is expected to adopt a prudent funding approach.

Additionally Moody's has also upgraded the senior unsecured debt ratings under CCT MTN to A3 from Baa1, and the program rating to (P)A3 from (P)Baa1.The outlook on the ratings is stable, reflecting the agency’s expectation of predictable cash generation from CCT's current portfolio.

Moody’s has however said that CCT's ratings could be downgraded if either the REIT’s financial metrics weaken or operating environment deteriorates.

Units of CCT fell by about 1.69% to close the trading day at SGD1.75.

CapitaCommercial Trust property, Capital Tower, in the heart of Singapore's CBD.
CapitaCommercial Trust property, Capital Tower, in the heart of Singapore's CBD.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.