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[SINGAPORE] CapitaLand Investment (CLI) is moving to list its first real estate investment trust (Reit) in China with two major malls valued at 2.8 billion yuan (S$499 million).

The listing on the Shanghai Stock Exchange will be the first for a retail Reit by an international company.

Gerry Chan, chief executive officer of CapitaLand China Trust’s (CLCT) manager, said that the new Reit, CapitaLand Commercial C-Reit (CLCR), offers a strategic opportunity for CLCT to enter the expanding China Reit (C-Reit) market. 

“It provides a platform to unlock value from our mature assets, bolstering our financial flexibility to pursue income diversification and enhance portfolio quality.”

CLCR will be seeded with the mature assets CapitaMall SKY+ in Guangzhou and CapitaMall Yuhuating in Changsha, with a total gross floor area of 168,405 square metres. The malls have an aggregate committed occupancy rate of 97 per cent.

Currently, both malls are owned within the CapitaLand Group’s portfolio, with the Guangzhou property jointly held by CLI and the group’s privately held CapitaLand Development (CLD), while the Changsha asset is owned by CLCT.

CLI, CLCT and CLD will hold at least 20 per cent of the new Reit, with CLI as sponsor and asset manager.

In a statement on Thursday (Apr 17), CLI China chief executive officer Puah Tze Shyang said: “The proposed listing of CLCR is in line with CLI’s strategy to pursue asset-light growth and expand in China by tapping domestic capital.”

It will strengthen CLI’s listed funds platform, broaden its access to perpetual domestic capital, and grow assets under management and recurring fee income, Puah added.

When asked whether there would be an overlap between CLCT and CLCR, Chan said the C-Reit will focus on income-producing retail assets.

While Singapore Reits are able to redevelop their assets to achieve the highest and best use, this is something C-Reits are unable to do at the moment, Chan said at a media and analyst briefing on Thursday.

Both CLCR and CLCT will have access to retail assets on CLI’s balance sheet and third-party pipeline, and CLCT will retain its right of first refusal.

Chan said: “China’s domestic capital market and investor base is largely untapped by global Reit players. Through our participation as a strategic investor, we can also improve interest from qualified domestic debt and equity investors.”

Meanwhile, CLCT will pursue a growth strategy as a diversified asset class Reit, anchored by a broad portfolio of retail properties, business parks and logistics parks. 

CLCT’s portfolio of malls has remained resilient, and CapitaLand is well-known in China as a mall operator, owner and investor, Chan added. 

He also said: “CLCT’s investment mandate covers the Greater China region, including Hong Kong and Macau, whereas CLCR will concentrate exclusively on mainland China.”

CLI currently manages S$18 billion worth of retail assets across 43 properties in China. It said it would continue to offer a quality pipeline of potential assets to support the growth of the new Reit and CLCT. 

Ben Lee, CEO of CapitaLand Development China, said CLCR will create a complete cycle covering investment, development and management in China’s commercial real estate market, improving the liquidity of commercial assets.

The proposed listing is subject to the approvals of the China Securities Regulatory Commission, the Shanghai exchange and CLCT’s independent unitholders.

The Reit is expected to be listed by this year, Chan said.

Shares of CLI closed S$0.05 or 2 per cent higher at S$2.59 on Thursday.