in 2005

$2.2 billion deal doubles CapitaLand's China assets

Southeast Asia's biggest developer, CapitaLand, doubled its holdings in the world's most populous country with the acquisition of the Chinese assets of Orient Overseas International for $2.2 billion. Singapore-based CapitaLand raised $2 billion from the November IPO of CapitaMalls Asia. Orient Overseas will keep a 7.9 percent stake in Beijing Oriental Plaza in the Chinese capital and its wholly owned Wall Street Plaza in New York City after the deal. Bloomberg January 19, 2010

CapitaMalls Asia aims to speed up growth with special focus on China

Singapore's largest property group CapitaLand will spin off its $20.3 billion retail portfolio into a separate unit, which will be listed on Singapore Exchange.

The group's retail arm CapitaLand Retail will be renamed CapitaMalls Asia (CMA), and will have a Pan-Asian portfolio of 86 retail properties. The new company will take the lead on all future retail activities while CapitaLand will focus on non-retail businesses.

Announcing the plans yesterday, CapitaLand chief executive Liew Mun Leong said that this was the 'most important announcement since we were listed 10 years ago'.

He added: 'I can't think of any (other) announcement that has had such a big impact on the group.'

CapitaLand said the proposed listing of CMA will allow the group to accelerate the growth of its integrated shopping mall business.

Since 2002, CapitaLand has increased ten-fold the total value of its owned and managed retail property portfolio, from $1.8 billion then to $20.3 billion as at end-June 2009. These malls will now be held by CMA instead.

While the overall portfolio value of the malls in which CMA has a share (including minority interests) as well as it manages is $20.3 billion, CMA's effective interest in the properties is a much smaller $7 billion. And the book cost of the properties is $5.3 billion.

CapitaLand plans to retain its control over CMA and would be 'comfortable' selling just 20-30 per cent of the company in the initial public offering (IPO), chief financial officer Olivier Lim said in a briefing.

This means that CapitaLand should raise at least $1 billion from CMA's IPO, assuming a 20 per cent float at book cost.

Mr Lim said that it is too early to discuss the valuation of CMA and that the company 'can be patient' regarding the timing of the listing. CMA could have an estimated debt-to-equity ratio of 0.3 times to 0.5 times, which would give the company the potential to take on debt of about $1.6 billion to $2.6 billion, Mr Lim added.

This will allow CMA to grow by buying land for new developments or purchasing completed malls, for example.

The transaction will also reduce CapitaLand's borrowings and raise its cash levels, Mr Lim said.

After the IPO, CapitaLand shareholders could receive a potential special dividend - depending on the gain from the planned listing as well as CapitaLand's overall cash position, gearing and the business plans and capital requirements of the other business units.

CMA's portfolio comprises 59 completed malls in Singapore, China, Malaysia, Japan and India. Another 27 properties are currently being developed. More than half of all malls are in China, which is expected to provide the engine of growth for CMA.

'One of CapitaMalls Asia's key growth markets will be China, where we have an early-mover advantage, having built up an extensive network of tenants, contacts and knowledge of local market conditions,' said Mr Liew.

He added that CapitaLand will consider a secondary listing for CMA on another stock exchange, possibly in China, 'in time to come'.

Analysts were surprised by CapitaLand's decision to spin off its retail arm into a separate listed entity, but said that the move could pay off for both companies.

The listing of CMA provides much more clarity on the valuation of the overall retail business which today makes up 22 per cent of CapitaLand's business, said Macquarie analyst Soong Tuck Yin.

'The announcement is light on details but we think this is positive for CapitaLand because Asian retail is a strong growth area they can capitalise on, and CapitaMalls Asia could provide investors with a direct entry into the high-growth Asian retail business for which there are very few pure-play vehicles,' he said.

For the two retail real estate investment trusts (Reits) now under CapitaLand Retail, it will be business as usual. The group's stakes in CapitaMall Trust and CapitaRetail China Trust will be held under CMA in future. Both Reits will continue to enjoy the existing rights of first refusal they have from the group.

CapitaLand also said that its retail real estate fund and Reit management business will be transferred to CMA to create an integrated business model focused in the retail real estate sector.   - 2009 October 7    BUSINESS TIMES



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