CapitaLand to sell 20 malls in China for 8.37b yuan

CAPITALAND is set to divest its share of interest in a group of companies that hold 20 retail malls in China for an agreed value of 8.37 billion yuan (about S$1.71 billion) to unrelated parties.

The real estate group said before trading opened on Friday that these malls are located across 19 cities, 14 of which are non-core cities. CapitaLand has one mall in each non-core city. Each of the 20 malls has an average gross floor area (GFA), excluding car park, of about 40,000 square metres (sq m).

The undisclosed buyers will pay US$881.1 million for equity in these retail assets. In addition, the buyers will assume US$220.4 million in outstanding shareholder loans on the books of the companies that are being divested.

The group projected that this transaction will generate net proceeds of about S$660 million and a net gain of about S$75 million. It added that the loss of recurring income arising from this transaction will be limited, as these 20 malls accounted for about 4 per cent and 7 per cent of CapitaLand's respective total and China shopping mall portfolio valuation as at June 30, 2017. The transaction is targeted for completion in the second quarter of this year.

CapitaLand said that this deal falls under its "retail mall portfolio reconstitution" and follows its divestment of CapitaMall Kunshan in the Chinese city of Kunshan last month, and the formation of a joint venture between CapitaLand and CapitaLand Retail China Trust last November to acquire Rock Square, an 84,000 sq m shopping mall in the first-tier city of Guangzhou.

CapitaLand's president and CEO, Lim Ming Yan explained that CapitaLand is seizing a window of opportunity offered by transformative changes to China's retail industry to reconstitute its mall portfolio.

He cited a burgeoning middle class and the rising popularity of omni-channel retailing as some of these transformative changes.

He added too that "unlocking the value of mature assets for reinvestment into new growth opportunities is a hallmark of CapitaLand's capital recycling strategy".

"We will continue to invest in dominant assets in core Chinese city clusters, where we already enjoy a competitive advantage," he said.