CRCT to acquire three CapitaLand malls in China for RMB2,960 million
Accretive acquisition will expand CRCT’s portfolio size by 18.6% for long-term growth
Singapore, 11 June 2019 – CapitaLand Retail China Trust Management Limited (CRCTML), the manager of CapitaLand Retail China Trust (CRCT), today announced that CRCT has entered into an agreement with a subsidiary and associated companies of CapitaLand Limited to acquire 100% interests in three companies that hold three malls in China – CapitaMall Xuefu and CapitaMall Aidemengdun in Harbin and CapitaMall Yuhuating in Changsha. The accretive acquisition will diversify CRCT’s footprint in China from eight cities to 10 and enable it to gain exposure to two rising provincial capital cities with strong economic fundamentals and long-term growth potential, namely Harbin in Heilongjiang Province, north China and Changsha in Hunan Province, central China.
The acquisition of the three companies is based on an agreed value of RMB2,960 million (about S$589.2 million) for the three malls held by the companies. CRCT’s total acquisition outlay is estimated at S$505.4 million, subject to post-completion adjustments. CRCT intends to finance the proposed acquisition via a combination of debt and equity with an objective to achieve accretion. The financing plan details will be decided at a later date. The transaction, which is conditional upon CRCT unitholders’ approval at an extraordinary general meeting, is expected to be completed in 3Q 2019.
With a total gross floor area (GFA) of 248,282 square metres (sq m), the three multi-tenanted malls with established anchor tenants and specialty retail mix will expand CRCT’s portfolio GFA by 30.7% and boost the number of leases in its portfolio by 52% – thereby enhancing CRCT’s portfolio diversification and creating new synergies among its multi-tenanted malls. At 99.0%, the occupancy of the three malls is well above the market average, reflecting their popularity with retailers and entrenched market leadership.
Mr Soh Kim Soon, Chairman of CRCTML, said: “This is a strategic acquisition that will position CRCT for growth. With an attractive implied net property income (NPI) yield of 6.0%1, higher than CRCT’s existing portfolio NPI yield of 5.7%2, the proposed transaction offers a rare opportunity for CRCT to acquire three established malls in two fast-growing provincial capital cities. Post-acquisition, CRCT’s enlarged portfolio will comprise 14 shopping malls, up from the current 11, providing it with a larger footprint and scale to create portfolio synergies. CRCT’s portfolio size will grow by about 18.6% to S$3.8 billion3, while NPI will enjoy an uplift of 22.8% to RMB959.3 million4 on a pro forma basis.”
Mr Tan Tze Wooi, CEO of CRCTML, said: “The proposed acquisition represents a continuation of CRCT’s reconstitution efforts starting 1Q 20195 to boost its portfolio mix, enhance income quality and add new growth drivers. It is in line with our acquisition growth strategy to create a quality portfolio of malls that caters to evolving aspirations and lifestyle needs of Chinese consumers.”
“Located near transportation hubs and serving large population catchments, CapitaMall Xuefu, CapitaMall Aidemengdun and CapitaMall Yuhuating are quality and mature assets that registered CAGR of 6.5%, 8.7% and 6.3% in tenants’ sales6 between 2016 and 2018 respectively. Well-established in their respective catchments, the malls have demonstrated resilient performance over the years through market cycles. Upon acquisition, they will add immediate strengths to CRCT’s portfolio, while offering significant scope for repositioning and asset enhancement in the next few years as anchor leases reach expiry.”
“The addition of these three assets will increase the contribution of multi-tenanted malls to CRCT’s portfolio gross revenue by 1.8% to 93.5%7, while the maximum gross revenue8 contribution by the top two properties within CRCT’s portfolio will decrease from 44.9% to 36.0% on a pro forma basis. The accretive acquisition will rejuvenate and strengthen CRCT’s portfolio, consolidating its market leadership as the largest S-REIT focusing on China malls. As the only REIT focused on China malls in CapitaLand Group, CRCT is well-positioned to continue benefitting from its sponsor’s strong asset pipeline.”
Please refer to the Annex A for property details of the three assets and Annex B for the city profiles of Harbin and Changsha.
1 Computed using the aggregate FY 2018 NPI of the properties divided by the aggregate agreed value of the properties.
2 Computed using FY 2018 NPI of CRCT’s existing portfolio divided by its valuation as at 31 December 2018, including CRCT’s 51.0% interest in Rock Square whose NPI yield is computed based on the annualised NPI for the period 1 February 2018 to 31 December 2018.
3 Based on 100% interest in all of CRCT’s properties. Valuations of the target properties are based on the agreed values with vendor.
4 Includes FY 2018 NPI of the properties, assuming CRCT had held and operated the properties from 1 January 2018 to 31 December 2018. This includes CRCT’s 51.0% interest in Rock Square’s NPI for the period from 1 February 2018 to 31 December 2018 which is accounted for as part of “Share of results (net of tax) of joint venture”.
5 On 1 February 2019, CRCT entered into a bundle deal in Hohhot, China, to acquire a mall in Yuquan District and divest CapitaMall Saihan. The transaction is expected to be competed in 2H 2020. Further, on 29 March 2019, CRCT announced its divestment of its 51% interest in CapitaMall Wuhu. The transaction is expected to be completed in 2H 2019.
6 Excludes tenants’ sales from supermarkets.
7 Includes CRCT’s 51.0% interest in Rock Square.
8 Based on gross revenue for FY 2018 and accounting for CRCT’s 51.0% interest in Rock Square.