CapitaLand Commercial Trust - OCBC Investment 2018-09-13: Extends Lease With HSBC At 21 Collyer Quay By A Year

CAPITALAND COMMERCIAL TRUST SGX:C61U

CapitaLand Commercial Trust - Extends Lease With HSBC At 21 Collyer Quay By A Year

CapitaLand Commercial Trust (CCT) announced yesterday that it has signed a one-year lease extension for its entire 21 Collyer Quay property with HSBC. The new lease will commence on 30 Apr 2019, with total rent payable by HSBC amounting to S$27.7m.
Although the extension is only for a year, we see this as a slight positive, as it removes the near-term uncertainty over whether HSBC would be vacating the building when its previous lease expires in Apr next year.
Furthermore, based on our calculations, the new rental rate translates to ~S$11.51 psf/month, which is higher than the S$8.48 psf/month currently being paid by HSBC.

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Looking further ahead, CCT highlighted that it is evaluating options for the property after 2020. This includes
1. refurbishment and re-letting, and
2. redevelopment and divestment.
We see a third possibility, which is a further two-year lease extension closer to the expiration of this new lease, as HSBC may potentially consider moving its premises to the upcoming Central Boulevard site which is expected to come on-stream in 2022.
Maintain HOLD with a fair value estimate of S$1.69.

Andy Wong Teck Ching CFA OCBC Investment Research | https://www.iocbc.com/ 2018-09-13

SGX Stock Analyst Report HOLD Maintain HOLD 1.690 Same 1.690