CapitaLand was formed from the merger of DBS Land and Pidemco in 2000. The two developers were holding a tad too much debt to grow in those distant days. In order to lighten its balance sheet, reinvest and “turn its capital over”, CapitaLand divested a handful of malls into Singmall Property Trust (SPT) in 2001. The then-new concept of REITs wasn’t quite sold convincingly and the attempted issue failed. Some nine months later, SPT was renamed CapitaMall Trust and the rest — as they say — is history.
Four REITs, one stapled security, one business trust and 21 years on, CapitaLand is the largest developer/asset manager in Southeast Asia, and arguably Asia, with more than $100 billion in assets and funds under management.
As many other property players emulated its strategy of spinning off REITs where possible, CapitaLand had to do something to set itself apart. In June 2019, CapitaLand completed the acquisition of Ascendas-Singbridge from Temasek Holdings as it sought a bigger, broader asset base. With a deal size of $11 billion, it marked the largest M&A within Singapore to date.
Less than two years later, CapitaLand was again ahead of the pack: It decided to split its business into the longer gestation development business, and a property investment and management company.
On March 23, CapitaLand, together with CLA Real Estate Holdings (CLA), announced a scheme of arrangement to effect the proposed corporate restructuring, where CLA will be the largest shareholder of CapitaLand Investment Management (CLIM) with a 51.8% stake. CLA is 100% owned by Temasek Holdings.
CapitaLand will distribute approximately 48% of shares in CLIM to all its shareholders, excluding CLA. CapitaLand will also distribute in-specie 6% of units in CapitaLand Integrated Commercial Trust (CICT) to shareholders, excluding CLA, thereby bringing its current 28.9% stake in CICT to 22.9%.
The rationale for this is so that CICT and as a result CapitaLand China Trust (CLCT) will not be consolidated within CLIM’s balance sheet. CICT carries debt with its debt-to-asset ratio at 40.6%, as at Dec 31, 2020. REITs are asset-heavy and CLIM’s purpose is to be asset-light.
Pro forma NAV of CLIM stands at $14.7 billion as at December 2020 with assets under management (AUM) of $115 billion. The CLIM share is valued at its NAV that includes the NAV of the REITs.
The implied value per share for CapitaLand’s shareholders is $4.102, based on the current share capital or $3.969 per share assuming fully diluted share capital should convertible bonds be exercised. CapitaLand’s NAV per share as at December 2020 is $4.30 and its NTA, which excludes goodwill, is at $4.09. CapitaLand’s FY2020 NAV includes nearly $1.64 billion of revaluation losses, and $861 million of impairments.
The plan is for CLIM to list with around $10 billion of projects which can be recycled into its REITs and funds.
CLIM is not a done deal. The proposal to implement CLIM is by way of an EGM and a scheme of arrangement which will require a few steps with high barriers. CLA cannot vote in either. The scheme document will be dispatched in 3Q2021, with the EGM to be held within the same quarter.
If all goes according to plan, CLIM will be listed by way of introduction in 4Q2021.
