SINGAPORE (July 16): CapitaLand completed its merger with Ascendas-Singbridge (ASB) on June 30. The group acquired all the shares in two ASB subsidiaries from Temasek for $6 billion, to create the largest diversified property group in Asia.
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Upon completion of the deal, CapitaLand’s total assets under management (AUM) increased to $123 billion – $73 billion via listed REITs and $50 billion on balance sheet or within private funds – including logistics and business parks, industrial, lodging, commercial, retail and residential assets across 32 countries.
This deal will see Temasek receiving $6 billion – 50% in cash and 50% in new CapitaLand shares at $3.50 per share – representing a premium of $11.3% over CapitaLand’s one-month volume weighted average price of $3.1447.
Now, CapitaLand’s REITs and business trusts have expanded to include Ascendas REIT (AREIT), CapitaLand Commercial Trust (CCT), Ascott Residence Trust (ART), CapitaLand Retail China Trust (CRCT), Ascendas India Trust (a-iTrust), CapitaLand Malaysia Mall Trust (CMMT) and Ascendas Hospitality Trust (AHT).
Following the merger, ART and AHT will be combining their entities to become the largest hospitality trust in Asia Pacific and the 8th largest globally, with a combined asset value of $7.6 billion. The combined enlarged portfolio will see a total of 88 properties with more than 16,000 unit in 39 cities and 15 countries.
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In this transaction, ART will acquire all units in AHT for about $1.24 billion, comprising $61.8 million in cash and 902.8 million new ART units.
Furthermore, The Ascott Limited, CapitaLand’s lodging business unit, yesterday has inked contracts with 26 properties with over 6,000 units across 22 cities and 11 countries.
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The properties, which will open in phases from 2019 to 2023, are mostly signed under management contracts, with three on franchise agreements.
On July 11, CapitaLand’s newly acquired REIT, a-iTrust, entered into a construction funding and forward purchase agreement with a subsidiary of Arshiya, to develop and later acquire an additional warehouse at the Arshiya Free Trade Warehousing Zone (FTWZ) in Panvel.
See: Ascendas India Trust to build and acquire warehouse in Panvel for $42.1 mil
The total construction funding is expected not to exceed INR 700 million ($13.7 million), while the total consideration for the transaction is estimated at INR 2.1 billion.
Once acquired, the trust will lease the additional warehouse to a subsidiary company of Arshiya for six years under a master lease arrangement, whereby Arshiya will pay rent to a-iTrust to operate and manage the warehouse.
The decision to construct this additional warehouse is to accommodate incremental demand from existing and prospective tenants at the Panvel FTWZ.
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With this, CGS-CIMB is keeping its “buy” call on CapitaLand with an increased target price of $4.15.
In a July 12 report, analyst Lock Mun Yee says, “The new business structure, organised by locations such as China, Singapore and International, India, lodging and CapitaLand Financial would likely give each unit a complete value chain platform.”
“We think this overall structure should enable the group to explore capital deployment opportunities more effectively going forward,” she adds.
The merger has ballooned the group’s AUM to $123 billion, and with this broader asset class reach and wider geographical coverage, the analyst reckons that the group could further attract new capital partners and potentially establish new platforms in the longer run to drive its capital recycling strategy.
As at 3.40pm, shares in CapitaLand are trading at $3.67 or 0.83 times FY19 book value with a dividend yield of 3.37%.
