CapitaLand’s China REIT to fund SGD0.5 billion acquisition with debt, equity mix

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CapitaLand Retail China Trust (CRCT) is acquiring 100% interests in three companies that hold three malls in China from its sponsor, CapitaLand.

The properties are namely CapitaMall Xuefu and CapitaMall Aidemengdun in Harbin, and CapitaMall Yuhuating in Changsha.

The acquisition is based on an agreed value of RMB2,960 million (SGD589.2 million).

CRCT’s total acquisition outlay is estimated at SGD505.4 million, subject to post-completion adjustments.

The REIT intends to finance the proposed acquisition via a combination of debt, and equity, but financing plan details will be decided at a later date, it said on 11 June.

The transaction, which is conditional upon CRCT unitholders’ approval at an extraordinary general meeting, is expected to be completed in 3Q 2019.

The 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, said the REIT’s manager.

The properties feature total gross floor area (GFA) of 248,282 square metres, will expand CRCT’s portfolio GFA by 30.7%, and increase the number of leases in the REIT's portfolio by 52%.

Total occupancy of the three malls is at 99%.

“With an attractive implied net property income (NPI) yield of 6.0%, higher than CRCT’s existing portfolio NPI yield of 5.7%, the proposed transaction offers a rare opportunity for CRCT to acquire three established malls in two fast-growing provincial capital cities”,said Soh Kim Soon, chairman of the REIT’s manager.

Post-acquisition, CRCT’s enlarged portfolio will comprise 14 properties, up from the current 11.

The REIT’s portfolio size will grow by about 18.6% to SGD3.8 billion, while NPI will increase by 22.8% to RMB959.3 million on a pro forma basis.

CRCT’s unit price is currently trading about 2.5% lower from its previous close on the Singapore Exchange, at a price-to-book ratio of just above 0.9 according to the Singapore REIT fundamentals table.

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