CMT - Signs of improvement

Operating environment improving. According to mgmt, retail sales and visitor traffic have picked up in April & May, with 1Q09 the worst quarter in their view, partly due to the timing of CNY. Although sales and visitor traffic will likely show a YoY dip, this is still an improvement over 2007. The per-formance of the suburban malls remains resilient, although growth for the portfolio is likely to be muted over the next year. The impact of increasing competition from upcoming supply has been manageable.

Initial signs of recovery in CMBS market. Credit markets remains tight, but there appears to be initial signs of improving appetite for bond issues and convertible securities, albeit at a high cost. Refinancing requirements this year have been addressed with proceeds from the rights issue, and CMT aims to extend and stagger the duration of borrowings in the longer term. Balance sheet has been strengthened to 29.2% post rights.

Asset enhancement and acquisition updates. Mgmt is reviewing Jurong Entertainment Centre's AEI plans to optimize the use of space (they have permission to double the plot ratio to 3x). Further savings in construction costs is likely. The mall has been closed since end 08, and mgmt earlier indicated plans to commence the redevelopment by year end. Other planned AEIs have been deferred, with AEI for The Atrium likely to start only by end next year. Mgmt views ION as an attractive acquisition (CMT has a ROFR) as they believe there is upside in rents as the asset matures. That said, an acquisition is unlikely until stabilization in the trading performance, which is likely to take 6-12 months.

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