Singapore’s CapitaLand announced today a plan to restructure the Group’s business to consolidate the investment management platforms into listed “CapitaLand Investment Management” (CLIM), and to privatise the real estate development business of the Group.
With assets under management (AUM) of about S$115 billion, CLIM is expected to be the largest real estate investment manager (REIM) in Asia, and the third largest listed REIM company globally. The privatised development entity will develop and incubate projects as a key source of pipeline for CLIM, entrenching the mutually reinforcing ecosystem within the Group.
CapitaLand will continue to own a 52% interest upon listing of CLIM. CapitaLand will also distribute in specie 388.2 million units in CapitaLand Integrated Commercial Trust, representing 6.0% of the Trust’s outstanding units, bringing its current 28.9% stake in the Trust to 22.9%.
CLIM at its inception will be a fully integrated REIM with funds and property management capabilities across multiple asset classes and a spectrum of private and listed funds. The managers of all the listed real estate investment trusts (REITs) and business trusts, as well as selected unlisted funds currently managed by CapitaLand, will be held under CLIM. These funds have a total Fund AUM (“FUM”) of about S$78 billion as of 31 December 2020, having grown at a CAGR of approximately 15% since 2017. CLIM’s investment management business will be a scalable and global business focused on Fee-related Earnings (FRE) and FUM growth.
CapitaLand’s full stack lodging management business, which encompasses the leading global serviced residence management platform under The Ascott Limited (Ascott), will also become a part of CLIM. The lodging capabilities will provide a distinctive growth engine for FRE as well as proven track record of further expansion into other adjacent long-stay sectors such as multifamily properties.
In Australia, Capitaland, principally participates in the market via their management of the Ascendas REIT which owns approximately 40 logistics and suburban office assets worth over $2.5bn. Management of the vehicle will pass over to CLIM.
CLIM will hold the stakes in the listed REITs and business trusts, as well as the managed private funds and have within its investment portfolio over S$10.1 billion worth of high-quality, income-generating properties. Most of these properties can be recycled and serve as potential pipeline to grow FUM for CLIM fund vehicles over an expected monetisation period of approximately three years. In addition, the recycling will generate financial resources for further growth.
The remaining real estate development-related business and assets under CapitaLand, with a pro forma Net Asset Value (NAV) of about S$6.1 billion, will be held privately by CLA upon completion of the Scheme. The proposed deal will allow Eligible Shareholders to realise immediate value upside from the development business, which is a segment requiring commitment of capital for longer-term gestation projects.
The privatised development arm will continue to support CLIM with its deep development capabilities, by participating and collaborating in the development and/or redevelopment of projects within CLIM and its managed funds. The existing ecosystem is hence preserved for the benefit of the restructured Group. Being part of this ecosystem will enable CLIM to tap on a key pipeline source to augment its FUM growth. Post restructure, the privatised entity will also act as an incubator for potential new businesses.
Mr Ng Kee Choe, Chairman of CapitaLand Limited, said: “Significant progress has been made in the last few years to pivot CapitaLand from a largely traditional development-focused business to one that is more asset-light and fee-income driven. This proposed restructuring is a significant and important milestone in CapitaLand’s transformation. It will provide the impetus for us to further expand and scale up our asset and investment management, and lodging businesses whilst benefitting from the pipeline of projects from CapitaLand as part of the ecosystem. It will also extend our market leadership in the Asian real estate investment management business. Shareholders will get an opportunity to remain invested in these asset-light growth businesses through CLIM. At the same time, shareholders will benefit from the substantial value that will be unlocked.”
Mr Wong Kan Seng, Chairman of CLA Real Estate Holdings, said: “As one of Asia’s largest diversified real estate groups, this restructuring will play a key role in setting CLIM on a focused and high growth trajectory. It will also provide flexibility for the development business to pursue longer gestation and capital-intensive projects. As a major shareholder of CLIM upon completion of the proposed transaction, the privatised CapitaLand and its development arm will support the growth of CLIM as a committed development partner, and by contributing a pipeline of assets that the privatised CapitaLand will incubate. Both entities will have substantial cross-platform synergies and complementary strengths to seize growth opportunities in the market.”
Mr Lee Chee Koon, Group CEO of CapitaLand Group, said: “This restructuring is about sharpening our focus and positioning ourselves to be an asset-light and capital-efficient business. We have made good progress to pivot ourselves to the new economy sectors, expanding our global footprint and growing our fee-income business. We are now taking the next step to create a leading global real estate investment manager with dominance in Asia, especially through our track record in the public REITs space. As listed REIMs generally trade at a premium to their NAVs in the capital markets, we are confident that CLIM will be able to drive returns for our shareholders given its scale, capabilities and a strong ecosystem.”
Mr Lee added: “The real estate development business is subject to longer gestation periods and not adequately appreciated by the public markets. With a privately held development business, we will be able to better ride property development cycles to optimise returns across asset classes and geographies. We can make more appropriate risk-return decisions to undertake attractive but longer gestation projects, and optimally build our pipeline and incubate projects. With the privatised development arm as a key source of pipeline for CLIM, the well-established CapitaLand ecosystem remains intact. This symbiotic relationship within the Group will be a major advantage for CLIM and differentiate it from other real estate investment managers.”
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