Clct Divest Capitamall Yuhuating 88 Premium Subscribe 5 Ipo Units Capitaland Commercial C Reit
CapitaLand China Trust (CLCT) has announced that it will be subscribing for 5% of the total number of IPO units in the upcoming CapitaLand Commercial C-REIT (CLCR). The IPO units will be listed on the Shanghai Stock Exchange (SSE).
The final price of each IPO unit has been set at RMB5.718 ($1.03), according to a September 8 bourse filing by CLCT. This price was determined through a book-building process at an offer price range of RMB4.756 to RMB5.932 per unit.
This translates to a total offering size of RMB2,287.2 million, representing a premium of approximately 7% over the estimated offering size of RMB2,137.5 million.
CLCT signed a strategic investor placement agreement with the CLCR manager on August 28, after receiving approval from the China Securities Regulatory Commission on August 27 to list CLCR on the SSE.
Upon its listing, CLCR will be CapitaLand Investment’s (CLI) eighth listed fund and China’s first international-sponsored retail C-REIT.
According to CLI’s August 27 announcement, CLCR’s initial portfolio will include two retail assets: CapitaMall SKY+ in Guangzhou and CapitaMall Yuhuating in Changsha. The combined properties have a total gross floor area of 168,405 sqm and an aggregate committed occupancy of 97%, according to CLI.
CLCT is proposing to divest CapitaMall Yuhuating to CLCR, while CLI and the unlisted CapitaLand Development (CLD) are also proposing to divest CapitaMall SKY+. CLI will continue to operate both properties as the sponsor and asset manager of CLCR.
CLCT, CLI, and CLD will be considered “strategic investors” in CLCR and will collectively 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. This represents a premium of approximately 8.8% over the floor price of RMB748.0 million and approximately 3.7% over the valuation of CapitaMall Yuhuating as of the end of 2024.
The exit yield is approximately 6.2% based on CapitaMall Yuhuating’s actual net property income (NPI) for FY2024 ended December 31, 2024, of RMB50.7 million.
The gross proceeds from the proposed divestment would be approximately RMB813.5 million. After accounting for the proposed subscription and relevant transaction costs, the net proceeds from the proposed divestment would be approximately RMB663.4 million.
Approximately $20.6 million of CLCT’s gross proceeds will be used for the proposed subscription of 5% of CLCR’s IPO units.
If the proposed transaction had been completed on December 31, 2024, it is expected to be 1.0% accretive to CLCT’s distribution per unit (DPU) on a pro forma basis. This is assuming 72,463,768 units are repurchased by the manager under the unit buyback mandate at an average price of 69 cents per unit. In this scenario, the net proceeds used for the repurchase of 72,463,768 units would be approximately $50.0 million. It also assumes the remaining net proceeds are used to pare down debt.
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On a pro forma basis, the proposed transaction is expected to increase CLCT’s net asset value (NAV) per unit to $1.11 from $1.09, while CLCT’s aggregate leverage is expected to fall to 42.3% from 42.6%.
After accounting for CLCT’s IPO subscription and transaction costs, net proceeds are estimated to be approximately RMB663.4 million. If these net proceeds are used to pare down debt, CLCT’s aggregate leverage will decrease from 42.6% as of March 31 to 41.2%.
Gerry Chan, CEO of the manager of CLCT, says: “CLCR offers a strategic opportunity for CLCT to enter the expanding C-REIT market. It provides a platform to unlock value from our mature assets, bolstering our financial flexibility to pursue income diversification and enhance portfolio quality. This aligns with our growth strategy as a diversified, multi-asset class REIT, anchored by a broad portfolio of retail properties, business parks and logistics parks. CLCR will focus on retail assets.”
Chan also adds: “CLCT’s investment mandate covers the Greater China region, including Hong Kong and Macau, whereas CLCR will concentrate exclusively on Mainland China. With nearly two decades of proven track record, CLCT is well-placed to leverage this new platform and advance our strategy of building a balanced portfolio that capitalises on China’s fast-evolving consumption- and innovation-led economy.”
