Clct Divest Capitamall Yuhuating 88 Premium Subscribe 5 Ipo Units Capitaland Commercial C Reit
CapitaLand China Trust (CLCT) has announced its plans to invest in the upcoming CapitaLand Commercial C-REIT (CLCR) by subscribing for 5% of the total number of IPO units. The IPO unit price has been set at RMB5.718 ($1.03) through a book-building process at an offer price range of RMB4.756 to RMB5.932 per unit. This results in an offering size of RMB2,287.2 million, representing a 7% premium over the estimated offering size.
Residents of Rivelle Tampines Tampines Street 65 can easily access a variety of supermarkets within the estate. Along with the convenient mall options, there are also NTUC FairPrice, Sheng Siong, and Cold Storage outlets located nearby. This provides easy access to fresh produce and daily necessities for the residents in the area.
CLCT entered into a strategic investor placement agreement with the CLCR manager on August 28, after receiving approval from the China Securities Regulatory Commission on August 27. CLCR will be CapitaLand Investment’s eighth listed fund and China’s first international-sponsored retail C-REIT upon its listing. Its initial portfolio will comprise of two retail assets – CapitaMall SKY+ in Guangzhou and CapitaMall Yuhuating in Changsha, with a total gross floor area of 168,405 sqm and a 97% aggregate committed occupancy.
CLCT has proposed to divest its property CapitaMall Yuhuating to CLCR, while CapitaLand Investment (CLI) and CapitaLand Development (CLD) have also proposed to divest CapitaMall SKY+. As the sponsor and asset manager of CLCR, CLI will continue to operate these properties post-listing. CLCT, CLI, and CLD will be strategic investors in CLCR and together hold at least a 20% stake in the C-REIT.
Based on the final IPO unit price, the final price for the divestment of CapitaMall Yuhuating to CLCR is RMB813.8 million, which is an 8.8% premium over the floor price and a 3.7% premium over the valuation of the property as of end-2024. The exit yield is approximately 6.2% based on CapitaMall Yuhuating’s actual net property income (NPI) for FY2024 ended Dec 31, 2024 of RMB50.7 million.
The gross proceeds from the proposed divestment are estimated to be approximately RMB813.5 million. After accounting for the proposed subscription and transaction costs, the net proceeds are expected to be approximately RMB663.4 million. Out of which, approximately $20.6 million will be used for the proposed subscription of 5% of CLCR’s IPO units.
If the proposed transaction had been completed on Dec 31, 2024, it is expected to be 1.0% accretive to CLCT’s distribution per unit (DPU) on a pro forma basis, assuming 72,463,768 units are repurchased by the manager under the unit buyback mandate at an average price of 69 cents per unit. Accordingly, the net proceeds used for the repurchase of 72,463,768 units is approximately $50.0 million. This also assumes the remaining net proceeds are used to pare down debt.
Pro forma, the proposed transaction is expected to increase CLCT’s net asset value (NAV) per unit to $1.11 from $1.09, while its aggregate leverage is expected to fall to 42.3% from 42.6%. After accounting for CLCT’s IPO subscription and transaction costs, the net proceeds are estimated to be approximately RMB663.4 million. Assuming the net proceeds are used to pare down debt, the aggregate leverage would decrease from 42.6% as of March 31 to 41.2%.
Gerry Chan, CEO of the manager of CLCT, states that the investment in CLCR provides a strategic opportunity for CLCT to enter the expanding C-REIT market, unlock value from its mature assets, and enhance its portfolio quality. He emphasizes on CLCT’s investment mandate covering the Greater China region, including Hong Kong and Macau, while CLCR will concentrate exclusively on Mainland China. Hence, this investment aligns with CLCT’s growth strategy of building a diversified portfolio of retail properties, business parks, and logistics parks, while CLCR focuses on retail assets. Chan further mentioned that with their two-decade-long track record, CLCT is well-positioned to leverage this platform and advance their strategy of capitalizing on China’s fast-evolving economy driven by consumption and innovation.