Capitaland Commercial C Reit Opens 196 Higher Shanghai Stock Exchange
CapitaLand Commercial C-REIT (CLCR) is the latest addition to CapitaLand Investment’s (CLI) growing portfolio of listed funds. The eighth fund to be listed by CLI, CLCR opened at a 19.6% premium to its initial public offering (IPO) price on the Shanghai Stock Exchange (SSE) on Sept 29, with an opening price of RMB6.84.
CLCR successfully raised RMB2.29 billion ($409 million) by issuing 400 million IPO units at RMB5.718 per unit, surpassing the initial estimate by 7%. Based on the IPO price, CLCR is forecasted to offer a distribution yield of 4.40% for FY2025 ending Dec 31 and 4.53% for FY2026.
CLCR is China’s first internationally-sponsored retail C-REIT. Its offline institutional tranche was oversubscribed 253 times earlier this month, setting a new record for retail C-REITs in China. The IPO also saw strong retail interest, with the public tranche being over 535 times subscribed and closing ahead of schedule.
Speaking in Mandarin at CLCR’s listing ceremony on Sept 29, CLI China CEO Puah Tze Shyang expressed his optimism regarding the market’s response to the listing, saying that it “underscores the market’s dual recognition of CLI’s asset management capabilities and the resilience of China’s consumer market”.
Puah also added that “respect is earned, not given”, and that despite bringing over 20 years of REIT management expertise, CLI remains committed to earning its reputation.
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In China, institutional investors participating in the bookbuilding exercise are referred to as offline institutional investors, while those subscribing through the public tranche are known as online institutional investors.
According to CLI, most of the IPO units were allocated to insurance companies, securities firms, and “strategic capital investors”. DBS and HSBC were also present at the Sept 29 listing ceremony.
Based on CLI’s Sept 12 announcement, cornerstone investors had taken up 40.11% of the units, while offline institutional investors were allotted 27.92% in the bookbuilding tranche. Online institutional investors subscribed for the remaining 11.97%. Only Chinese investors can invest in CLCR. In comparison, CapitaLand China Trust (CLCT), a diversified multi-asset class vehicle targeting global investors, has a mandate that spans retail, office, and industrial assets across Greater China. On the other hand, CLCR invests exclusively in retail assets in mainland China, targeting domestic investors.
CLI, CLCT, and CapitaLand Development (CLD) collectively hold a 20% interest in the IPO units. In particular, CLCT has subscribed for a 5% strategic stake in CLCR at the IPO price of RMB5.718 per unit.
According to Puah, “when you combine CLCR and CLCT, what is interesting is that [CLCT] is a REIT-of-REITs.” He also added that they serve foreign investors looking for China exposure, a purely domestic institutional and retail clientele. Puah also mentioned that their insurance capital felt like a CLCT, as it’s diversified, but “it will then allow us to take on a little bit more risk.”
Puah also pointed out the benefits of their domestic-for-domestic strategy, saying that they have different platforms, allowing them to service a more diversified capital pool.
CLCR’s IPO portfolio
To seed CLCR’s IPO portfolio, CLI and CLD have divested CapitaMall SKY+ in Guangzhou and CLCT is divesting CapitaMall Yuhuating in Changsha into CLCR. The transaction is expected to be legally completed by the end of October.
CapitaMall SKY+ is located in Guangzhou’s Baiyun Central Business District, directly connected to Baiyun Park subway station. Meanwhile, CapitaMall Yuhuating is a community mall located in Changsha’s Yuhua District. It can be accessed via two adjacent subway stations on two lines, as well as a potential future subway station on a third line. Combined, the two malls have a total gross floor area (GFA) of 168,405 sqm and an overall occupancy rate of 96%.
CLI will continue to operate CapitaMall SKY+ and CapitaMall Yuhuating as the sponsor and asset manager of CLCR.
Furthermore, CLI said that it will support the growth of CLCR and CLCT by providing a “quality pipeline of potential assets”. In China, CLI manages 43 operational retail properties across 18 cities, with total retail assets under management of approximately $18 billion.
Retail C-REITs in China
The China Securities Regulatory Commission and National Development and Reform Commission have progressively launched C-REITs across different sub-sectors since June 2021. With the listing of CLCR, there are now 75 C-REITs across various asset classes, including rental housing and logistics. As of Sept 19, prior to CLCR’s debut, the 74 C-REITs have a total market capitalisation of some RMB221 billion.
Retail C-REITs, in particular, were launched in March 2024 under the broader “consumer infrastructure” or “consumption” banner. Since then, 10 retail C-REITs have listed, but with only one retail asset each, in compliance with Chinese regulations. One of them is Harvest Wumart Consumer REIT, which listed on the SSE in March 2024, with an underlying supermarket asset located in Beijing’s central urban area.
CLCR, like its peers, is limited to acquiring one or two assets for one year after its listing date. The sponsor of China Resources Mall REIT, which listed on the Shenzhen Stock Exchange in March 2024, has identified its next injection of assets, says Puah.
CLCR is the first retail C-REIT to list with two assets in its IPO portfolio. Puah believes this was a concession to showcase the benefits of scale and diversity, and added that it “showed that we are very clear on our target”.
Puah said that they have made a pitch to the regulator to reduce the lock-up period from one year to six months. “For now, we are just waiting [to see] whether we can start to inject more stabilised, quality assets after six months, rather than a year.”
The earliest retail C-REITs, which have been on the market for a year and a half, are currently preparing to grow their portfolios. Puah mentioned that the sponsor of China Resources Mall REIT, which listed on the Shenzhen Stock Exchange in March 2024, had identified its next asset injection.
Puah also said that they are “very open” to working on a ninth listed fund. However, their “first order of business” is to ensure that CLCR trades well. “We are always looking out for how the market changes [and] how the market evolves. We are in the business of running the largest REIT franchise in Asia Pacific. So, if there’s a chance for me to add to [CLI’s] REITs [funds under management], yes, we will do it.”
In addition to the listing of CLCR, CLI has also closed the first sub-fund, China Business Park RMB Fund IV, under its inaugural onshore master fund in China – the CLI RMB Master Fund. Established in May, the Master Fund has a total equity commitment of RMB5 billion and invests in a series of sub-funds that acquire income-producing assets with long-term growth potential.
As a part of their capital recycling strategy, CLI has divested a business park into this sub-fund. Also, they are planning to launch a second sub-fund focused on retail assets in 4Q2025, with a target equity commitment of RMB900 million.
CLI mentioned that it has a pipeline of retail assets, logistics parks, and rental housing across Tier 1 and top Tier 2 cities that could potentially provide growth opportunities for this platform.
Puah commented that the listing of CLCR and the continued growth of their RMB Master Fund demonstrate strong momentum in their capital recycling journey and pivot to an asset-light business model. He also added that the listing of CLCR and their RMB funds support their domestic-for-domestic fund strategy to tap into the substantial Chinese capital market to grow their funds under management and recurring fee income.