Dear readers, I read that Capitaland Investment intends to launch its first REIT called Capitaland Commercial C-Reit on the Shanghai Stock Exchange.
Capitaland Commercial C-Reit will be seeded with CapitaMall SKY+ in Guangzhou and CapitaMall Yuhuating in Changsha, with a combined value of S$500 million.
This is of an interesting development to me as Capitaland has already an existing Capitaland China Trust listed on SGX with the following assets in different parts of China:
Beijing: CapitaMall Xizhimen, CapitaMall Wangjing and CapitaMall Grand Canyon
Chengdu: CapitaMall Xinnan
Guangzhou: Rock Square
Hohhot: CapitaMall Nuohemule
Harbin: CapitaMall Xuefu and CapitaMall Aidemengdun
Harbin: Changsha: CapitaMall Yuhuating
This begs the question: why does Capitaland need to create another Reit to hold its China retail assets? Capitaland could actually place the two assets meant for Capitaland Commercial C-Reit into Capitaland China Trust.
The answer, I would think is to seek a listing for Capitaland’s China-based retail assets directly on the bourse where these assets would be better appreciated. With better appreciation, the Reit will perform better.
This is as compared to Capitaland China Trust listed on Singapore Stocks Exchange which currently trades at just 0.584 Price-to-Book ratio and is down by approximately 50% in the past five years.
There could also be a possibility that Capitaland China Trust, by virtue of it not being appreciated by local investors could be eventually privatised and with its assets placed onto Capitaland Commercial Reit.
My above view is aligned to my thinking that eventually the Capitaland, Frasers, Mapletree family of Reits or Trusts could be consolidated, you can read my view here.