CapitaLand Investment Ltd: Triggering first C-REIT listing
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<Alert!> CapitaLand Investment Limited : Triggering first C-REIT listing
- Proposed inaugural China REIT (C-REIT) seeded by assets within group’s ecosystem
- CLI, CLCT and CLD to collectively own 20% in the new C-REIT, expected to be listed soon
- Investors will laud CLI for their continued pursuit of FUM growth, tapping a growing pool of onshore capital in China
- Questions on CLCT’s viability and strategy initially; but overtime, the REIT could tap a onshore recycling opportunity and attract international capital looking to deploy into China, steep discount to book unwarranted
What has happened.
CapitaLand Investment Limited (“CLI”) announced the application to list is long awaited China Real Estate Investment Trust (C-REIT). CapitaLand Commercial C-REIT (“CLCR”) will be the first international sponsored retail C-REIT, marking the group’s inaugural entry into an emerging REIT market in China. The initial portfolio will be seeded by the sponsor group and focus on operating assets CapitaMall SKY+ (Guangzhou) (owned by CLI) and CapitaMall Yuhuating (Changsha) (currently owned by CLCT) with a total valuation of RMB 2.8bn. CLI, together with CapitaLand China Trust (“CLCT”) and CapitaLand Development (“CLD”) will collectively hold a minimum 20% in CLCR. CLI will continue to operate these assets post listing.
Our view.
Investors should laud CLI (BUY, TP SGD 3.85) for a continued growth of its overall funds management platform. We see the group being able to create a perpetual capital platform in China and tapping a new group of onshore investors. For CLCT (BUY, TP SGD 0.85) , we see this as an alternative path of growth as a vehicle leveraging on a broader ecosystem. While investors may question the overlap in mandate, CLCT will be a suitable entry point for international money to get exposure to CLIs’ China reit platform, and at higher yields spread. The successful growth of this ecosystem could help compress yield spread differential between CLCT and the CLCR, over time. Alternatively, if CLCT continues to trade at a significant discount to book, markets could start to question on the viability of CLCT and questions on its privatisation will certain come back again. 
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