CapitaLand has proposed to merge its retail REIT, CapitaLand Mall Trust (CMT), with its office REIT, CapitaLand Commercial Trust (CCT) and form CapitaLand Integrated Commercial Trust.

It will be the largest REIT in Singapore, and the third largest REIT in the Asia-Pacific region.

CapitaLand Integrated Commercial Trust will have a market capitalisation of SGD16.8 billion (USD12.5 billion).

The proposed merger will be effected by way of a trust scheme of arrangement.

Under this, CMT will be acquiring all units of CCT for a total consideration comprising approximately 88% in new units in CMT and 12% in cash.

And the consideration per CCT Unit comprises 0.720 new CMT units and SGD0.2590 in cash.

As such, this implies a gross exchange ratio of 0.820.

Following the merger, CapitaLand Limited will retain its sponsor stake of approximately 29.1% in CapitaLand Integrated Commercial Trust.

The REIT will have a portfolio of 15 malls and 10 office assets, including two office properties in Frankfurt, Germany.

CapitaLand Integrated Commercial Trust will become the largest proxy for Singapore commercial real estate with a portfolio of 24 properties valued at SGD22.9 billion.

96% of this value are assets located in Singapore.

“As of today, about 29% of the combined portfolio value of the two REITs already features integrated retail and office components”, said Soo Kok Leng, Chairman of CCT’s manager.

“This includes Raffles City Singapore, which is co-owned by CMT and CCT”.

“It is therefore a logical progression for both REITs to come together as one entity to more efficiently capture additional growth opportunities over the long term”, he added.

Investment mandate

CapitaLand Integrated Commercial Trust will still focus on Singapore.

However, it can also undertake overseas acquisitions in developed countries of up to 20% of property value or SGD4.6 billion.

On a pro forma basis, the merger will be distribution per unit (DPU) accretive for both CMT and CCT unitholders.

The FY 2019 pro forma DPU for CMT would have increased 1.6% from 11.97 cents to 12.16 cents.

And the DPU for CCT would see an accretion of 6.5% from 8.88 cents to 9.46 cents.

The merger is subject to the approval by unitholders of CMT and CCT at extraordinary general meetings that will be convened.

Once approved, it is expected to be completed before end-2Q 2020.

CCT will become a wholly owned sub-trust of CMT.

It will also be delisted from the Singapore Exchange.

Both CMT and CCT are suspended from trading on 22 January.