Clct Divest Capitamall Yuhuating 88 Premium Subscribe 5 Ipo Units Capitaland Commercial C Reit
CapitaLand China Trust (CLCT) has announced its intention to invest in the upcoming IPO of CapitaLand Commercial C-REIT (CLCR), which is set to be listed on the Shanghai Stock Exchange (SSE). According to a filing by CLCT on Sept 8, the final price for each IPO unit has been determined through a book-building process, with a range of RMB4.756 to RMB5.932 per unit. This translates to an offering size of RMB2,287.2 million, representing a premium of approximately 7% over the initial estimate.
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CLCT has entered into a strategic investor placement agreement with the CLCR manager on Aug 28, following approval from the China Securities Regulatory Commission on Aug 27 for the listing of CLCR on SSE. Upon listing, CLCR will be the first international-sponsored retail C-REIT in China and the eighth listed fund under CapitaLand Investment (CLI).
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As announced by CLI on Aug 27, the initial portfolio of CLCR will consist of two retail assets: CapitaMall SKY+ in Guangzhou and CapitaMall Yuhuating in Changsha. These properties have a total gross floor area of 168,405 sqm and an aggregate committed occupancy of 97%. CLCT has proposed to divest CapitaMall Yuhuating to CLCR, while CLI and CapitaLand Development (CLD) have proposed to do the same with CapitaMall SKY+. As the sponsor and asset manager of CLCR, CLI will continue to operate both properties after the listing.
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CLCT, CLI, and CLD will be strategic investors in CLCR, collectively holding at least a 20% stake in the C-REIT. The final price for the divestment of CapitaMall Yuhuating to CLCR has been set at RMB813.8 million, representing a premium of approximately 8.8% over the floor price and 3.7% over the valuation of the property as of end-2024. This translates to an exit yield of 6.2% based on the actual net property income (NPI) for FY2024 ended Dec 31, 2024.
The gross proceeds from this divestment will be approximately RMB813.5 million, with the net proceeds estimated at RMB663.4 million after accounting for the proposed subscription and transaction costs. Of this amount, approximately $20.6 million will be used by CLCT to subscribe for 5% of CLCR’s IPO units. The remaining net proceeds will be used to reduce debt.
Based on pro forma calculations, the proposed transaction is expected to be 1.0% accretive to CLCT’s distribution per unit (DPU) on a pro forma basis, assuming that 72,463,768 units are repurchased by the manager under the unit buyback mandate at an average price of 69 cents per unit. This would also increase CLCT’s net asset value (NAV) per unit to $1.11 from $1.09 and reduce its aggregate leverage to 42.3% from 42.6%.
After using the net proceeds to reduce debt, aggregate leverage is expected to decrease to 41.2% from 42.6% as at March 31. Gerry Chan, CEO of the manager of CLCT, highlights the strategic opportunity for CLCT to enter the growing C-REIT market through its investment in CLCR. He adds that this will unlock value from CLCT’s mature assets and enhance its financial flexibility to pursue income diversification and improve portfolio quality. With a proven track record of nearly two decades, CLCT is well-positioned to leverage this new platform and advance its growth strategy in China’s evolving consumption- and innovation-driven economy.