SINGAPORE (Nov 28): CapitaLand Retail China Trust (CRCT) and sponsor CapitaLand have entered into a 51:49 joint venture to acquire a 100% stake in a company that owns the Rock Square shopping mall in Guangzhou’s Haizhu District for RMB 3.36 billion ($688.9 million).
This marks CRCT’s first mall and CapitaLand’s second in Guangzhou, the provincial capital of Guangdong Province and one of four first-tier cities in China.
Opened in 2013, the five-storey Rock Square shopping mall has a gross floor area (GFA) excluding car park of about 83,591 sqm as well as a net lettable area (NLA) of 53,107 sqm.
“China is an important core market to CapitaLand,” says Jason Leow, CEO of CapitaLand Mall Asia. “Given Rock Square’s significant scale and strategic location with excellent transport links, the acquisition presents a rare opportunity to increase our exposure to the high-growth retail market in a first-tier city.”
“As an operational mall with upside potential, the acquisition will also help CapitaLand to increase our recurring income base as we continue to expand our business,” he adds.
As at June 2017, the mall was 96.4% committed, including well-known international brands such as AEON, UNIQLO, ZARA and Victoria’s Secret.
“The addition of Rock Square serves to diversify CRCT’s tenant base and improve the quality of earnings by increasing our exposure to more varied and higher-yielding trade categories,” says Tan Tze Wooi, CEO of CapitaLand Retail China Trust Management. “Post-completion, the accretive acquisition will boost CRCT’s portfolio size by about 28% to approximately RMB 15.1 billion.”
The transaction is expected to be completed by 1Q18.
“Coupled with the cost synergies from working with our sponsor CapitaLand to manage the mall, we are confident of driving the growth of Rock Square and turning it into a significant contributor to our overall performance,” he adds.
CapitaLand intends to finance its share of the Joint Acquisition through a combination of existing cash and external financing.
Meanwhile, CRCT has proposed a private placement of some 51.5 million new units in the trust at an issue price of between $1.553 and $1.612 per new unit to raise gross proceeds of no less than $80.0 million. This is subject to an upsize option to issue up to 12.9 million additional new units to raise additional gross proceeds of approximately $20.0 million.
The issue price range represents a discount of between 3.5% and 7.0% to the volume weighted average price for all trades on CRCT units on Nov 28.
Units of CRCT closed 1 cent lower at $1.67 on Tuesday while shares of CapitaLand closed 3 cents lower at $3.53.
