SINGAPORE – CapitaLand has proposed the group’s biggest-ever overhaul that will see the privatising of its real estate development business and consolidation of its fund management and lodging business.
Under the scheme, the group’s investment management and fund managing platforms as well as its lodging business will be consolidated into CapitaLand Investment Management (CLIM), which is to be listed by introduction on the Singapore Exchange.
With assets under management (AUM) of about $115 billion, CLIM is expected to be the largest real estate investment manager (Reim) in Asia, and the third-largest listed Reim company globally.
Singapore’s biggest property developer announced the restructuring on Monday (March 22) along with CLA Real Estate Holdings, an indirect fully owned unit of Temasek Holdings and CapitaLand’s largest shareholder.
As part of the proposed restructuring, the group’s real estate development business will be placed under the private ownership of CLA. This entity will develop and incubate projects as a key pipeline for CLIM.
Under the proposed scheme, for every one share held in CapitaLand, eligible shareholders will receive one CLIM share, between 0.155 and 0.143 unit of CapitaLand Integrated Commercial Trust (CICT) and cash of $0.951.
The implied value per share for CapitaLand’s shareholders is $4.102, based on current share capital. This is 24 per cent above the last traded price of CapitaLand and represents a premium of 27 per cent to the one-month volume-weighted average price.
CapitaLand shares last traded at $3.31. The company called for a trading halt before the stock market opened on Monday.
Mr Lee Chee Koon, CapitaLand group chief executive officer, will be taking the helm of CLIM as group CEO.
“This restructuring is about sharpening our focus and positioning ourselves to be an asset-light and capital-efficient business,” he said.
“We have made good progress to pivot ourselves to the new economy sectors, expanding our global footprint and growing our fee-income business. We are now taking the next step to create a leading global real estate investment manager with dominance in Asia, especially through our track record in the public Reits space.
“As listed Reims generally trade at a premium to their NAVs (net asset values) in the capital markets, we are confident that CLIM will be able to drive returns for our shareholders given its scale, capabilities and a strong ecosystem,” he said.
Mr Lee added: “The real estate development business is subject to longer gestation periods and not adequately appreciated by the public markets. With a privately held development business, we will be able to better ride property development cycles to optimise returns across asset classes and geographies.
Under the proposed scheme, CapitaLand will distribute about 48 per cent of shares in CLIM to all its shareholders, excluding CLA.
As this is a one-for-one distribution, the share ownership ratio in CLIM immediately after the issuance of the CLIM shares will be equal to the eligible shareholders’ existing ownership in CapitaLand. CapitaLand will continue to own a 52 per cent interest upon listing of CLIM. Its current 28.9 per cent stake in CICT will be reduced to 22.9 per cent.
CLA will not participate in the distribution of the CICT units, and its entitlement to the CICT units will be distributed to the eligible shareholders as part of the scheme.
CLIM at its inception will be a fully integrated Reim with funds and property management capabilities across multiple asset classes and a spectrum of private and listed funds. The managers of all the listed real estate investment trusts (Reits) and business trusts, as well as selected unlisted funds currently managed by CapitaLand, will be held under CLIM.
These funds have a total fund AUM of about $78 billion as at end-December 2020, having grown at a compound annual growth rate of 15 per cent since 2017. CLIM’s investment management business will be a scalable and global business focused on fee-related earnings (FRE) and FUM growth, said the announcement.
CapitaLand’s full stack lodging management business, which encompasses the leading global serviced residence management platform under The Ascott Limited, will also become a part of CLIM.
CLIM will hold the stakes in the listed Reits and business trusts, as well as the managed private funds. It will also have within its investment portfolio over $10.1 billion worth of income-generating properties.
The remaining real estate development-related business and assets under CapitaLand, with a pro forma NAV of about $6.1 billion, will be held privately by CLA upon completion of the scheme.
The proposed deal will allow eligible shareholders to realise immediate value upside from the development business, which is a segment requiring commitment of capital for longer-term gestation projects, said CapitaLand.
Mr Ng Kee Choe, chairman of CapitaLand, said: “This proposed restructuring is a significant and important milestone in CapitaLand’s transformation. It will provide the impetus for us to further expand and scale up our asset and investment management, and lodging businesses whilst benefitting from the pipeline of projects from CapitaLand as part of the ecosystem. It will also extend our market leadership in the Asian real estate investment management business.”
CLA chairman Wong Kan Seng said: “As one of Asia’s largest diversified real estate groups, this restructuring will play a key role in setting CLIM on a focused and high growth trajectory. It will also provide flexibility for the development business to pursue longer gestation and capital-intensive projects.
“As a major shareholder of CLIM upon completion of the proposed transaction, the privatised CapitaLand and its development arm will support the growth of CLIM as a committed development partner, and by contributing a pipeline of assets that the privatised CapitaLand will incubate. Both entities will have substantial cross-platform synergies and complementary strengths to seize growth opportunities in the market.”
Mr Jason Leow, president, Singapore & International of CapitaLand group, will be the CEO of CapitaLand Development, the development business arm of the privatised entity, post the restructure.
The scheme is subject to regulatory conditions, the approval of the High Court and CapitaLand’s independent shareholders at an extraordinary general meeting and at a scheme meeting. It is expected to be completed by the fourth quarter this year.
J.P. Morgan (S.E.A.) Ltd and Allen & Gledhill are acting as financial adviser and legal counsel to CapitaLand respectively. DBS Bank and WongPartnership are financial adviser and legal counsel to CLA respectively.