CapitaLand to divest partial stakes in six Raffles City properties in China for $9.6 billion

CapitaLand said it expects to gain net proceeds of more than $2 billion from the transaction.
CapitaLand said it expects to gain net proceeds of more than $2 billion from the transaction.PHOTO: CAPITALAND
Raffles City Changning (Shanghai, left) and Raffles City Hangzhou.
Raffles City Changning (Shanghai, left) and Raffles City Hangzhou.PHOTOS: CAPITALAND

SINGAPORE - CapitaLand shares jumped on Monday (June 28) after the property giant said it will divest partial stakes in six of its Raffles City developments in China for 46.7 billion yuan (S$9.6 billion) to Ping An Life Insurance Company of China.

CapitaLand shares closed the day at $3.74 each, up six cents, or 1.6 per cent, with more than 8.23 million shares changing hands during the day.

The group is divesting partial stakes in Raffles City Shanghai, Raffles City Beijing, Raffles City Ningbo, Raffles City Chengdu, Raffles City Changning (Shanghai) and Raffles City Hangzhou.

It will retain effective stakes of between 12.6 per cent and 30 per cent in each development. The group currently holds effective stakes of 30.7 per cent to 55 per cent in the properties.

CapitaLand said it expects to gain net proceeds of more than $2 billion from the transaction, which is expected to be completed in the third quarter of 2021.

It is also expecting additional fee income from providing asset management services for these developments, said group chief executive Lee Chee Koon.

CapitaLand China's chief executive Puah Tze Shyang said some of the unlocked capital will be used to support the group's investment pivot to new economy assets such as business parks, logistics and data centres, forming a new pipeline for future recycling.

CapitaLand plans to grow its China exposure in this sector to $5 billion over the next few years, from the $1.5 billion at the end of 2020, he added.

In line with this investment strategy, CapitaLand announced in April a 3.66 billion yuan investment to acquire its first hyperscale data centre campus in Shanghai.

With the latest transaction, CapitaLand has made gross divestments of about $11.2 billion in the year to date. This is more than three times its annual divestment target of $3 billion, Mr Lee said. At the same time, it has grown its funds under management to $79.2 billion.

CapitaLand last week announced that it has registered as a private equity (PE) fund manager in China and plans for a renminbi-denominated fund product in the fourth quarter of 2021 that can capture investment opportunities in new economy assets.

Mr Lee on Monday said the group's PE fund manager status "has opened up more capital partnership opportunities with domestic institutional investors for CapitaLand".

"With multiple recycling vehicles and strategies, as well as diverse capital sources, we are confident of our next stage of growth as an asset-light, capital-efficient global real estate investment manager with a focus in Asia," he said.

Mr Adrian Loh, head of research for Singapore at brokerage firm UOB Kay Hian, said the divestments are positive for CapitaLand as they involve a strong partner as well as recurring asset management fee income. 

He added that at three times more than CapitaLand’s annual target, year-to-date divestments are “doing good”.

Monday’s moves follow CapitaLand’s restructuring in March, under which the company’s investment management platforms and lodging businesses were folded into a separate listed entity called CapitaLand Investment Management, while its real estate development business was placed under private ownership.