CLCT makes first foray into China logistics with accretive acquisition of four prime logistics properties for RMB1,683.4 million¹

• Strategic addition of high-quality logistics properties will boost the proportion of new economy assets in CLCT's enlarged portfolio
• Entry into the attractive logistics asset class will extend CLCT’s portfolio average land tenure while delivering accretion 

Singapore, 12 October 2021 – CapitaLand China Trust Management Limited (“CLCTML”), the manager of CapitaLand China Trust (“CLCT”), announced today the proposed acquisition of a portfolio of four prime logistics assets in Shanghai, Kunshan, Wuhan and Chengdu (the “Properties”), which are key logistics hubs in China and are within CapitaLand’s five core city clusters², from unrelated third parties (the “Acquisition”).  This marks CLCT’s first foray into China’s logistics sector and increases its exposure to new economy asset classes, following CLCT’s maiden purchase of a portfolio of five business park properties³; both part of CLCT’s multi-stage portfolio reconstitution strategy to strengthen its long-term income diversification and resilience.

The Acquisition is based on an aggregate agreed property value of RMB1,683.4 million (approximately S$350.7 million⁴), representing a discount of approximately 0.6% to the aggregate valuation by an independent valuer appointed by CLCT.  CLCT’s total cost of the Acquisition is estimated at approximately S$297.7 million⁵, subject to post-completion adjustments.  CLCT intends to finance the acquisition through an optimal mix of debt and equity.  Based on the proposed method of financing, the Acquisition is expected to be distribution per unit (“DPU”) accretive by 3.5%⁶ on a pro forma basis.  The Acquisition is expected to be completed by end of 2021.

The portfolio of four high-quality modern logistics properties has a total gross floor area (“GFA”) of 265,259 square metres (“sq m”), with a committed occupancy of 96.3% and weighted average lease to expiry⁷ (“WALE”) of 2.1 years as at 31 August 2021.  Three of the properties were completed between 2016 and 2018, while the fourth was completed in 2010.   Located in key logistics hubs near transportation nodes such as seaports, airports and railways, the properties are strategically located to serve the growing domestic logistical needs in China’s eastern, central and southwest regions.  Fitted with high-tech and modern features tailored to meet a wide range of e-commerce and logistics requirements, the properties are anchored by a strong domestic tenant base, including China’s leading technology-driven supply chain solutions and logistics services providers, as well as domestic market leaders for third-party logistics.  More than 80% of the leases⁸ have rental escalations in place, with a step-up ranging from 3% to 5% per annum.

“The acquisition is in line with CLCT’s investment strategy and near-term focus on new economy assets.  Post-acquisition, the proportion of new economy assets in CLCT’s enlarged portfolio will rise to 21.4% from 15.3% by asset value⁹.  Assets under management⁹ (“AUM”) will increase by 8.0% to S$4,729.2 million, reinforcing CLCT’s leadership as the largest multi-asset China-focused real estate investment trust in Singapore by AUM.” 

“In addition, the acquisition will enhance CLCT’s portfolio strength and income diversification.  NPI of the enlarged portfolio will increase by 12.8%¹⁰.  In terms of geographical diversification, the enlarged portfolio will increase CLCT’s presence in Shanghai from 0.4% to 3.1%, and its exposure to the rapidly growing second-tier cities from 36.7% to 38.6%.  Given the longer land tenure of China’s logistics properties at 50 years at inception compared with retail assets at 40 years at inception, the remaining weighted average land tenure expiry of CLCT’s enlarged portfolio will positively extend by 1.94 years¹¹ post-acquisition.”

To seize new opportunities in China’s real estate market, CLCT expanded its investment mandate in September 2020 to cover multi-assets that are used primarily for retail, office and industrial use.  Under its five-year acquisition growth roadmap, CLCT plans to achieve a balanced portfolio mix of 40% in commercial/integrated developments, 30% in retail properties and 30% in new economy assets (including business parks, logistics and data centers) by 2026.

Please refer to the Annex for a summary of CLCT’s logistics portfolio. 

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¹ RMB1,683.4 million is the aggregate agreed property value of the Properties.

² The five core city clusters in China under CapitaLand’s strategy are Beijing/Tianjin, Shanghai/Hangzhou/Suzhou/ Ningbo, Guangzhou/Shenzhen, Chengdu/Chongqing/Xi’an and Wuhan.

³ CLCT completed the acquisition of Ascendas Xinsu Portfolio on 4 January 2021; Ascendas Innovation Towers on 10 February 2021; Ascendas Innovation Hub on 26 February 2021; and Singapore-Hangzhou Science & Technology Park Phase I and II on 18 June 2021. 

⁴ Based on an exchange rate of S$1 = RMB4.80.

⁵ The purchase consideration is net of the onshore loans which CLCT will assume in respect of the acquisition of the Wuhan asset, the Kunshan asset and the Chengdu asset and takes into account that the Shanghai asset will be acquired debt-free.

⁶ The pro forma DPU impact is for illustrative purposes and is prepared based on CLCT's audited consolidated financial statements for the financial year ended 31 December 2020.  It is calculated assuming (a) the proposed Acquisition had been completed on 1 January 2020 and CLCT had held and operated the Properties for the financial year ended 31 December 2020; (b) the occupancy rates and committed lease rents of the Properties are as at August 2021 and includes the rent support and rent free reimbursement; (c) the proposed Acquisition is funded by S$120 million raised from a private placement and the remaining balance by debt.

⁷ By gross rental income.

⁸ By NLA.

⁹ Existing portfolio AUM is based on valuation as at 31 December 2020, includes the agreed property value for the five business park properties on an effective stake basis and excludes CapitaMall Minzhongleyuan and CapitaMall Saihan which were divested.  Enlarged portfolio AUM includes existing portfolio AUM and agreed property value for the Properties.

¹⁰ Based on the financial year ended 31 December 2020 NPI, inclusive of the rent support and rent free reimbursement.

¹¹ Weighted by GFA.

Annex - Summary of CLCT's Logistics Portfolio