CapitaLand revving up expansion plans

Shanghai

CAPITALAND Limited is set for more active land-banking and acquisitions as part of its expansion plans following the opening of four integrated projects in China in April, including three Raffles City projects.

The group's third Raffles City private equity fund that closed last October at US$1.5 billion still has some US$1 billion of dry powder waiting to be deployed after investing into Raffles City Shenzhen. Another US$2 billion worth of assets can be snapped up by the fund, assuming a 50 per cent leverage.

"The team is on the lookout for the right opportunities and will have some good news to share later this year or next year," said CapitaLand group president and CEO Lim Ming Yan on Sunday.

He was speaking to analysts and reporters after a tour of some of CapitaLand's newly opened projects in China.

Mr Lim said the group will continue to seek out development opportunities in core markets of China and Singapore where it has strong development teams. In many developed markets, there are also opportunities to acquire completed assets or assets close to completion where the group can value-add.

The opening of three Raffles City projects in Shenzhen, Changning in Shanghai and Hangzhou, as well as CapitaMall Westgate in Wuhan - spanning close to one million square metres in gross floor area - brings the group's total operational integrated developments across China's Tier-1 and Tier-2 cities to 15, including seven Raffles City projects.

CapitaLand China chief executive Lucas Loh noted that these newly completed projects represent a new generation of integrated projects built by the group that are larger in size with richer offerings.

The group will continue to explore more Raffles City projects in Beijing, Shanghai, Guangzhou and Shenzhen, he said.

Raffles City Chongqing, its biggest project in China and the largest investment in the country by any Singaporean company, costing 24 billion yuan (S$4.88 billion) - is on track to open from the second half of next year.

CapitaLand is already the foreign developer with the largest portfolio of integrated developments in China, where other leading players include Dalian Wanda, China Resources Land, Greenland and Hang Lung Properties.

"So far, both in Singapore and China, the integrated developments have given us very good returns," Mr Lim said. "Some of the best-performing or profitable projects we have are the integrated developments."

Despite the pervasiveness of e-commerce in China, CapitaLand said its newly completed shopping malls are faring well.

CapitaMall Westgate in Wuhan, for instance, recorded half a million footfall on the first four days of its opening, with an average daily footfall of 30,000-40,000 on weekdays and 50,000-60,000 on weekends.

The retail components in the three Raffles City projects achieved some 95 per cent in committed occupancy and more than 20 per cent of the space is leased to new-to-market flagship and concept stores. At these projects, the office, serviced residence and hotel components are opening progressively.

But clearly, the retail scene in China is changing, showing up in the malls' trade mix. Some 30-35 per cent of the space in the group's new malls is taken up by food and beverage (F&B) operators. For instance, at Raffles City Hangzhou, F&B and services trades take up 35 per cent and 15 per cent of retail space respectively.

CapitaLand Mall Asia CEO Jason Leow said that F&B used to take up 20-25 per cent of retail but now accounts for 30-40 per cent in the new malls. He conceded that the impact of increased "aspirational" tenant mix on yield remains unclear.

"I think it is a bet on the future," he said. "If we continue to depend on the traditional retailers, I think they may or may not continue to perform well."

As part of future-proofing its malls, CapitaLand also makes sure that the building specifications of new projects allow for future changes in tenant mix, Mr Leow said.

Strengthening the "network effect", it has secured six management contracts in Singapore and China for third party-owned malls. Its management contracts for third-party malls come with the right of first refusal to acquire the properties.

Elsewhere, CapitaLand will continue to grow and nurture the Vietnam market. It is back to the drawing board for India, where it may "reset" its strategy for the country, Mr Lim said.

As at March 31, some 77 per cent of CapitaLand's total assets contributed to recurring income, of which shopping malls and integrated developments form the bulk. China has been a core market for CapitaLand, accounting for 44 per cent of its total assets.