SINGAPORE: CapitaLand Retail China Trust Management Limited (CRCTML), the manager of CapitaLand Retail China Trust (CRCT), has announced that CRCT has entered into an agreement with a subsidiary and associated companies of CapitaLand Limited to acquire 100% interests in three companies that hold three malls in China – CapitaMall Xuefu and CapitaMall Aidemengdun in Harbin and CapitaMall Yuhuating in Changsha for RMB 2.96 billion. [the_ad id=”31605″] The accretive acquisition will diversify CRCT’s footprint in China from eight cities to 10 and enable it to gain exposure to two rising provincial capital cities with strong economic fundamentals and long-term growth potential, namely Harbin in Heilongjiang Province, north China and Changsha in Hunan Province, central China.
The acquisition of the three companies is based on an agreed value of RMB 2.96 billion (about S$589.2 million) for the three malls held by the companies. CRCT’s total acquisition outlay is estimated at S$505.4 million, subject to post-completion adjustments.
CapitaLand Retail China Trust (CRCT) intends to finance the proposed acquisition via a combination of debt and equity with an objective to achieve accretion. The financing plan details will be decided at a later date.
The transaction, which is conditional upon CRCT unit holders’ approval at an extraordinary general meeting, is expected to be completed in 3Q 2019.
With a total gross floor area (GFA) of 248,282 square metres (sq m), the three multi-tenanted malls with established anchor tenants and specialty retail mix will expand CRCT’s portfolio GFA by 30.7% and boost the number of leases in its portfolio by 52% – thereby enhancing CRCT’s portfolio diversification and creating new synergies among its multi-tenanted malls. At 99.0%, the occupancy of the three malls is well above the market average, reflecting their popularity with retailers and entrenched market leadership.
Tan Tze Wooi, CEO of CRCTML, said: “The proposed acquisition represents a continuation of CRCT’s reconstitution efforts starting 1Q 20195 to boost its portfolio mix, enhance income quality and add new growth drivers. It is in line with our acquisition growth strategy to create a quality portfolio of malls that caters to evolving aspirations and lifestyle needs of Chinese consumers.”
“Located near transportation hubs and serving large population catchments, CapitaMall Xuefu, CapitaMall Aidemengdun and CapitaMall Yuhuating are quality and mature assets that registered CAGR of 6.5%, 8.7% and 6.3% in tenants’ sales6 between 2016 and 2018 respectively. Well-established in their respective catchments, the malls have demonstrated resilient performance over the years through market cycles. Upon acquisition, they will add immediate strengths to CRCT’s portfolio, while offering significant scope for repositioning and asset enhancement in the next few years as anchor leases reach expiry.”
“The addition of these three assets will increase the contribution of multi-tenanted malls to CRCT’s portfolio gross revenue by 1.8% to 93.5%7, while the maximum gross revenue8contribution by the top two properties within CRCT’s portfolio will decrease from 44.9% to 36.0% on a pro forma basis. The accretive acquisition will rejuvenate and strengthen CRCT’s portfolio, consolidating its market leadership as the largest S-REIT focusing on China malls. As the only REIT focused on China malls in CapitaLand Group, CRCT is well-positioned to continue benefitting from its sponsor’s strong asset pipeline.”