Bigger is better in the local property trust sector, going by the latest proposed mega merger - this time a multi-billion-dollar tie-up between two firms linked to developer CapitaLand.
The proposed merger involves office landlord CapitaLand Commercial Trust (CCT) and shopping centre operator CapitaLand Mall Trust (CMT) joining forces to create what will be the biggest real estate investment trust (Reit) here.
The two trusts own a range of high-profile buildings across Singapore, including CMT's Funan, Plaza Singapura, Junction 8 and Tampines Mall, and CCT's Asia Square Tower 2, CapitaGreen and One George Street.
The new entity - called CapitaLand Integrated Commercial Trust (CICT) - will have a market cap of about $16.8 billion and a total property value of about $22.9 billion.
That will make it one of the top 10 merger and acquisition deals of all time here, and in the process create the third-biggest Reit in the Asia-Pacific and the top dog here.
"As the largest S-Reit (Singapore Reit), CICT will be CapitaLand's primary investment vehicle for commercial real estate in Singapore and other developed markets," the company said yesterday.
CMT, with 15 shopping centres, is already the largest mall owner here, while CCT is the biggest office landlord with 10 buildings, including two in Germany.
If CMT and CCT unitholders approve the merger, the CapitaLand group will have five Reits on the Singapore Exchange: CICT, Ascendas Real Estate Investment Trust, Ascott Residence Trust, Ascendas India Trust and CapitaLand Retail China Trust.
It will also retain its sponsor stake of about 29.1 per cent in the merged entity.
The $8.27 billion cash-and-stock deal involves CMT acquiring all the issued units in CCT in the form of cash and new CMT units.
CCT unitholders will receive $0.259 in cash for each unit they hold and 0.72 new CMT units at $2.59 apiece. This means CCT investors will be paid a scheme consideration of $2.1238 per CMT unit.
The deal is expected to lead to higher distribution per unit (DPU) for CMT and CCT.
For illustrative purposes, the pro-forma DPU accretion will be about 1.6 per cent for CMT and 6.5 per cent for CCT as at Dec 31 last year, if the merger had been completed on Jan 1 last year, and if CMT had held and operated the properties of CCT through to Dec 31.
The merger, which is at least the fifth tie-up among local Reits over the past 12 months, will give the enlarged new entity the ability to consolidate management expertise and build a bigger war chest for acquisitions.
It will also be able to compete better here and overseas in the retail and office sectors.
"It is a trend where we see Reits pushing for bigger size and diver-sification, both in terms of geography and asset type," said Mr Joel Ng, an analyst at KGI Securities (Singapore).
"Given the limited opportunities in Singapore for acquisitions, the combined entity will allow for more such integrated developments as it expands overseas."
The takeover action kicked off in January last year when CapitaLand struck a $6 billion deal with Temasek to combine Ascendas and Singbridge.
OUE Commercial Reit in April agreed to buy OUE Hospitality Trust. And in July, Ascott Residence Trust and Ascendas Hospitality Trust agreed to create the largest hospitality trust in the Asia-Pacific region, with $7.6 billion in assets.
Last month, Frasers Logistics & Industrial Trust agreed to buy Frasers Commercial Trust in a $1.5 billion deal.
THE BUSINESS TIMES, BLOOMBERG
Additional reporting by The Straits Times
What the two trusts own in Singapore
CapitaLand Mall Trust is the largest owner of shopping centre floor space, owning 14.6 per cent of floor space in shopping malls that have at least 100,000 sq ft of net lettable area. CapitaLand Commercial Trust is the largest owner of Grade A assets in Singapore's Central Business District. Here is a list of the properties owned in Singapore by the two trusts.
CAPITALAND MALL TRUST
•Tampines Mall, 4 Tampines Central 5
•Junction 8, 9 Bishan Place
•IMM Building, 2 Jurong East Street 21
•Plaza Singapura, 68 Orchard Road
•Bugis Junction, 200 Victoria Street
•JCube, 2 Jurong East Central 1
•Lot One Shoppers' Mall, 21 Choa Chu Kang Avenue 4
•Bukit Panjang Plaza, 1 Jelebu Road
•The Atrium@Orchard, 60A, 60B Orchard Road
•Clarke Quay, 3 River Valley Road
•Bugis+, 201 Victoria Street
•Bedok Mall, 311 New Upper Changi Road
•Westgate, 3 Gateway Drive
•Funan, 107, 109 North Bridge Road
•Raffles City Singapore, 252 North Bridge Road
CAPITALAND COMMERCIAL TRUST (CCT)
•Capital Tower, 168 Robinson Road
•Asia Square Tower 2, 12 Marina View
•CapitaGreen, 138 Market Street
•Six Battery Road, formerly the Standard Chartered Bank Building
•One George Street (CCT holds 50 per cent interest)
•Raffles City Singapore, 252 North Bridge Rd (CCT holds 60 per cent interest)
•21 Collyer Quay, formerly the HSBC Building
•CapitaSpring, 88 Market Street (CCT holds 45 per cent interest)
