CapitaLand China Trust (CLCT) has announced its intention to divest its 100% equity interest in CapitaMall Yuhuating, a retail property in Changsha, to CapitaLand Commercial C-REIT (CLCR), an indirectly wholly-owned subsidiary. This move is part of CLCT’s strategy to optimise its portfolio and enhance returns. The proceeds from this divestment will partly fund CLCT’s subscription to 5% of CLCR’s initial public offering (IPO) units.
The transaction, valued at no less than RMB748.0m (S$134.9m), will see CLCT subscribing to approximately S$20.7m worth of IPO units in CLCR. The divestment is expected to result in a 0.4% distribution per unit (DPU) accretion, assuming the proceeds are used to reduce debt and undertake unit buy-backs. The exit net property income yield is projected at 6.8%.
This divestment aligns with CLCT’s strategy to unlock value from mature assets and recycle capital. It will also strengthen CLCT’s financial position by potentially reducing its aggregate leverage from 42.6% to 41.4%. Additionally, the transaction provides CLCT with strategic access to China’s domestic capital market, differentiating it from other Singapore-based real estate investment trusts (S-REITs).
CapitaMall Yuhuating, located in Changsha’s Yuhua District, is a well-established community mall with convenient access to public transport. The divestment will enable CLCT to participate in the growing C-REIT market, which offers significant capital appreciation potential, supported by China’s efforts to boost consumer spending.
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