Operations Review

Lease Renewals and New Leases
The retention rate of our tenants in 2011 was 78.8%, reflecting our proactive lease management to constantly refresh the tenant mix in each property to remain relevant and attractive to our shoppers. On a portfolio basis, rental rates for lease renewals and new leases in 2011 saw an average increase of 6.4% against preceding rental rates. This translates to an average annual growth rate of 2.1% over a typical three-year lease term.

Summary of Renewals/New Leases
(from 1 January to 31 December 2011) (excluding newly created and reconfigured units)

  1. Includes only retail leases, excluding JCube which has ceased operations for asset enhancement works and The Atrium@Orchard.
  2. Based on compounded annual growth rate.
  3. Based on IMM Building's retail leases.
  4. Based on Raffles City Singapore's retail leases.
  5. Includes Iluma, Sembawang Shopping Centre, Hougang Plaza and Rivervale Mall.

Lease Expiry Profile
Our tenants typically have three-year lease terms. The portfolio lease expiry profile remained well spread out as at 31 December 2011, with 26.5% and 32.9% of the leases by gross rental income due for renewal in 2012 and 2013 respectively.

Portfolio Lease Expiry Profile
(as at 31 December 2011)

  1. Includes CMT's 40.00% interest in Raffles City Singapore (office and retail components). Excludes JCube which has ceased operations for asset enhancement works.
  2. Excludes gross turnover (GTO) rent.

Portfolio Lease Expiry Profile for 2012
(as at 31 December 2011)

  1. As a percentage of total net lettable area for each respective mall as at 31 December 2011.
  2. As a percentage of total gross rental income for each respective mall and excludes GTO rent.
  3. Includes office leases (for Raffles City Singapore, The Atrium@Orchard and IMM Building) and warehouse leases (for IMM Building only).
  4. Includes Iluma, Hougang Plaza, Sembawang Shopping Centre and Rivervale Mall. Excludes JCube which has ceased operations for asset enhancement works.

Top 10 Tenants
CMT's gross rental income is well-distributed within its portfolio of close to 2,500 leases. As at 31 December 2011, no single tenant contributed more than 3.0% of total gross rental income. Collectively, the 10 largest tenants accounted for about 20.7% of the total gross rental income.

10 Largest Tenants by Total Gross Rental Income1
(as at 31 December 2011)

  1. Includes CMT's 40.00% interest in Raffles City Singapore and excludes JCube. Based on actual gross rental income for the month of December 2011 and excludes GTO rent.

Trade Sector Analysis
CMT's portfolio is well-diversified and relies on many different trade sectors for rental income. As at 31 December 2011, Food & Beverage remained the largest contributor to gross rental income at 27.3% of the total portfolio. Fashion, which occupied 6.4% of the net lettable area, remained the second largest contributor to gross rental income at 13.6%.

  1. Includes CMT's 40.00% interest in Raffles City Singapore (only retail and office leases, excluding hotel lease) and excludes JCube.
  2. Based on commited gross rental income and excludes GTO rent.
  3. Others include Art Gallery, Education, Luxury and Warehouse.

Occupancy Rate
Coupled with our extensive network of international and local retailers, our active mall management and proactive leasing strategy have helped us to maintain high occupancy rates over the past nine years. The portfolio occupancy rate was at 94.8% as at 31 December 2011, mainly due to asset enhancement works which are being carried out at The Atrium@Orchard and Iluma.

Occupancy Rate
(as at 31 December 2011)

  1. Based on IMM Building's retail leases.
  2. Includes Iluma, Hougang Plaza, Sembawang Shopping Centre and Rivervale Mall. Years 2007 and 2008 exclude Sembawang Shopping Centre which commenced major asset enhancement works in March 2007. Years 2008 to 2011 exclude JCube which has ceased operations for asset enhancement works.
  3. Lower occupancy rate was due to 53.3% occupancy rate at Iluma, which is undergoing asset enhancement works.
  4. Based on Raffles City Singapore's retail leases.
  5. Lower occupancy rate was due to asset enhancement works at Lot One Shoppers' Mall.
  6. Lower occupancy rate was due to asset enhancement works at The Atrium@Orchard.

Portfolio Tenant Sales
CMT's portfolio tenant sales on a S$ per square foot (psf) per month basis, increased by 6.3% in 2011, compared to the preceding year. This marked the second consecutive year of rising tenant sales. Part of CMT's rental structure comprises GTO rent which is pegged to tenant sales. GTO rent made up only a small percentage of CMT's total gross revenue. It typically ranges from 3.0% to 5.0%, ensuring the stability of CMT's gross rental income.

  1. Excludes JCube, Hougang Plaza, The Atrium@Orchard and Iluma.

Compared with other retail real estate investment trusts (REITs) in Australia, Europe, United States and Canada, CMT's portfolio tenant sales (US$ psf per annum) in 2011 was among the highest.

Sources: Companies' data as at 30 September 2011, except for Simon Property (31 December 2011), CMT (31 December 2011) and Primaris (31 August 2011).

Performance of Tenant Sales by Trade
Most trade categories registered stronger sales performance with Telecommunications and Information Technology achieving the highest growth rates of 23.4% and 18.1% respectively in terms of tenant sales in 2011 as compared to 2010.

  1. Services include convenience store, bridal shop, optical, film processing, florist, magazine stores, pet shop/grooming, travel agency, cobbler/locksmith, laundromat and clinics.

Occupancy Cost
CMT's portfolio occupancy cost remained healthy at 16.0% in 2011. Our occupancy cost has improved over the past two years in tandem with the growth of CMT's tenant sales.

  1. Occupancy cost is defined as a ratio of gross rental (inclusive of service charge and advertising & promotional charge) to tenant sales. Portfolio excludes JCube, Hougang plaza, The Atrium@Orchard and Iluma.

Compared with other retail REITs in Australia, Europe, United States and Canada, CMT's portfolio occupancy cost was in line with that of our peers.

Sources: Companies' data as at 30 September 2011, except for CMT (31 December 2011).

Shopper Traffic
Shopper traffic has increased by 1.1% year-on-year in 2011, reflecting the active management of the tenancy mix in our portfolio to enhance the appeal of our malls. However, there was a slight decline in shopper traffic in the second half of the year, largely due to the ongoing asset enhancement works at some of our malls.

  1. For comparable basis, the chart includes the entire CMT portfolio of malls, except JCube which ceased operations for asset enhancement works and Hougang Plaza and The Atrium@Orchard for which traffic data was not available.

Value-Adding Acquisitions
On 1 April 2011, CMT acquired Iluma, a mall located directly opposite Bugis Junction. This acquisition has further strengthened CMT's retail foothold in the downtown core of Singapore, enabling it to capture a larger pool of shoppers in the city area, as well as youth from the educational institutions in the vicinity and tourists who patronise the downtown region. Given its strategic location next to Bugis Junction, there are potential synergistic values to be created through the integration of the mall with Bugis Junction. The two malls are already connected by an overhead link-bridge and there are opportunities to create an enlarged and seamless shopping destination with a complementary trade mix that will further enhance its overall attractiveness to shoppers.

On 30 May 2011, together with CapitaMalls Asia Limited and CapitaLand Limited, CMT acquired a prime site in Jurong Gateway, which is located in Jurong Lake District, Singapore's largest regional hub. Strategically located beside Jurong East Bus Interchange and Jurong East MRT Station, the development, named as Westgate, will comprise a lifestyle mall and a prime office tower. Together with IMM Building which will become a valuefocused mall, and JCube which will be positioned as a youth and entertainment mall, Westgate will form part of a "three-in-one" mega mall in Jurong, serving a population of close to one million in the western part of Singapore.

Asset Enhancement Initiatives (AEI)
In 2011, we continued to leverage on our experiences in extracting value through asset enhancement works. In January, we commenced works at The Atrium@Orchard, involving the creation of new retail space and its seamless integration with Plaza Singapura. Upon completion of the AEI in 2012, the lower levels of The Atrium@Orchard will be linked to Plaza Singapura to form an integrated retail mall.

In January 2012, we completed the first phase of upgrading works in Junction 8 which included the installation of a new facade, a glass canopy that provides seamless transition between Junction 8 and Bishan MRT Station as well as the creation of new outdoor seating areas for several existing food & beverage tenants.

CapitaMall Trust Report to UnitHolders 2010