CMT and CCT engage retail investors on merits of proposed merger at SIAS dialogue sessions
Proposed Merged Entity will be one of the largest REITs in Asia Pacific and the largest REIT in Singapore
Singapore, 22 September 2020 – CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT) held separate virtual dialogue sessions with their respective unitholders as part of their retail investor outreach for their proposed merger (Proposed Merger) to create a diversified commercial real estate investment trust (REIT), to be named “CapitaLand Integrated Commercial Trust” (CICT or the Merged Entity), upon completion of the Proposed Merger. More than 200 retail unitholders participated in the virtual dialogue sessions on 17 and 18 September 2020, which were facilitated by the Securities Investors Association (Singapore) (SIAS).
Mr Tony Tan, CEO of the CMT Manager and Mr Kevin Chee, CEO of the CCT Manager kicked off the respective CMT and CCT dialogue sessions with a presentation on the rationale and benefits of the Proposed Merger. Both CEOs then jointly responded to feedback and queries from unitholders in the question-and-answer segments moderated by Mr David Gerald, Founder, President and CEO of SIAS.
CMT and CCT Unitholders can pre-register for their respective virtual unitholder meetings and provide their voting instructions via proxy forms.
The following key points were raised at the sessions:
Repositioning for a post-COVID-19 world
Mr Tan highlighted that the Merged Entity will be strategically positioned to benefit from the trend toward mixed-use precincts and integrated developments across Singapore, which is expected to accelerate post-COVID-19. He said: “Westgate is an example of opportunities arising from the development of Jurong Gateway as a regional centre. Under the URA Master Plan 2019, we are going to see more regional centres sprouting up around Singapore. At the same time, URA has also introduced initiatives like the CBD Incentive Scheme and the rejuvenation of Orchard Road in order to transform these areas into mixed-use precincts. CMT’s footprint is spread across suburban and downtown locations, while CCT has sizeable quality assets in the CBD. These trends will present a lot of opportunities for the Merged Entity as several of the assets in the combined portfolio reside in the identified growth clusters. If the Merged Entity were to, at any point in time, decommission any of the properties for redevelopment, the financial impact would be significantly lower compared to the current status when we are separately listed.”
“These trends (toward mixed-use precincts and integrated developments) will present a lot of opportunities for the Merged Entity as several of the assets in the combined portfolio reside in the identified growth clusters. If the Merged Entity were to, at any point in time, decommission any of the properties for redevelopment, the financial impact would be significantly lower compared to the current status when we are separately listed.”
- Mr Tony Tan, CEO of CapitaLand Mall Trust Management Limited
Mr Chee said: “We meet our retail and institutional investors regularly. While they may adopt different investment styles and strategies, the one common denominator among them is the focus on investment returns. That’s what both CCT and CMT are driven toward, to deliver sustainable long-term returns to unitholders. For us to do that, we cannot sit still. We need to evaluate opportunities and assess the landscape that we are in. We need to understand the shifts and ebbs in demands and preferences, and make sure we fortify our platform, so we can deliver that growth and investment return that investors want. The Proposed Merger is about creating a strategic, transformative merger to proactively address these concerns, so we can continue to deliver sustainable returns.”
Positive signs of business recovery
Mr Tan noted that shopping malls are very much a part of Singaporeans’ lifestyles, and both shopper traffic and tenants’ sales are showing positive signs of recovery post-circuit breaker. He said: “We have seen a steady increase in shopper traffic since Phase 2 reopening. The recovery is led by larger and dominant malls such as IMM Building and Plaza Singapura, which recovered about 82% and 73% of their January footfall levels by end August. For the month of July, tenants’ sales in the suburban malls outperformed the downtown malls, but the gap is narrowing as more people return to the office and more visitors go to the downtown malls over the weekends. The tenants’ sales of suburban malls have recovered to more than 90% of the level a year ago with the smaller ones performing better compared to the same period last year.”
Mr Chee said: “As at end August, about 24% of our office community have returned. This must be considered in light of telecommuting remaining the default mode of work for companies under Phase 2 as advised by the authorities. With COVID-19 measures easing over time, we expect the trend of office tenants returning to continue.” Mr Chee noted that the Merged Entity, with its dominant portfolio of Grade A office assets in the CBD, is well positioned to ride the post-COVID-19 upturn. The Singapore CBD is expected to remain the primary office location given its concentration of quality office stock and its well-established business ecosystem that provides a critical mass of business networks required for companies to thrive."
Structuring a balanced and attractive deal for all stakeholders
The Scheme Consideration of 0.720 new CMT Units and S$0.2590 in cash for every CCT Unit was agreed between the parties pursuant to the Implementation Agreement relating to the Proposed Merger dated 22 January 2020.
Mr Tan noted: “Despite the recent market volatility, both CMT Unit price and CCT Unit price have largely traded in tandem at around the net exchange ratio of 0.72 times. For CCT Unitholders, the cash component as a proportion of the total consideration has gone up compared to the proportion in January.”
Mr Chee added: “The Scheme Consideration fundamentally reflects a market-to-market valuation of CCT and CMT. As a merger of equals, the Scheme Consideration is aimed at achieving a balanced and attractive outcome for both CCT Unitholders and the CMT Unitholders, as well as resulting in a Merged Entity that will be well positioned to capitalise on future opportunities. CCT Unitholders may stay invested in the Merged Entity to reap the future benefits of the combined platform, while enjoying the optionality of the cash component.”
Media and analyst briefing on the proposed merger of CMT and CCT on 4 Sep 2020
“The Scheme Consideration fundamentally reflects a market-to-market valuation of CCT and CMT. As a merger of equals, the Scheme Consideration is aimed at achieving a balanced and attractive outcome for both CCT Unitholders and the CMT Unitholders, as well as resulting in a Merged Entity that will be well positioned to capitalise on future opportunities.”
- Mr Kevin Chee, CEO of CapitaLand Commercial Trust Management Limited
Proactive management of leverage profile
Mr Tan said: “Following the completion of the Proposed Merger, we are looking at a pro forma gearing of about 39.7%, which is still within a manageable range in the short-term. We will proactively review the Merged Entity’s business and capital management plans to ensure an optimal capital structure through cycles. We have been disciplined in managing our leverage profile and will continue to do so.”
Facilitation of odd lots trading
Mr Chee gave the commitment that the CCT Manager will facilitate the trading of odd lots of CMT Units so that CCT Unitholders who wish to round up or down their holdings to the nearest 100 CMT Units can do so. Arrangements have been set up with three brokerage firms – OCBC Securities, Phillip Securities, and UOB Kay Hian – to facilitate odd lots trades for six weeks from 28 October to 11 December 2020 (based on an indicative timeline). The brokerage fees (including any goods and services tax relating to such fees) in respect of odd lots trades carried out via the aforementioned brokerage firms during the six weeks will be borne by the CCT Manager.
Unitholders urged to provide their voting instructions via proxy forms
Due to the COVID-19 situation in Singapore, the CMT EGM as well as CCT's EGM and the Trust Scheme Meeting will be held via electronic means. Both CEOs urged CMT Unitholders and CCT Unitholders to pre-register for their respective virtual unitholders' meetings and provide their voting instructions via proxy forms.
To vote, unitholders must complete and sign the proxy forms for the respective meetings and submit them to the CMT or CCT unit registrars (as the case may be) via email or by post 48 hours before the respective times of the meetings on 29 September 2020. On 29 September 2020, the CMT EGM will start at 10.30 am, while CCT will convene its EGM and Trust Scheme Meeting at 2.00 pm and 2.30 pm1 respectively.
Further details on the Proposed Merger can be found at bit.ly/CMTCCTSep20Em.
Note:
1 Or in the event that CCT's EGM concludes before 2.30 pm, as soon thereafter following the conclusion of CCT's EGM.