Subscribe to The Business Times today to receive your very own Nespresso Inissia coffee machine worth $188.
Find out more at btsub.sg/btdeal
WITH more recurring income to be derived from a major pipeline of assets turning operational in the next few years, CapitaLand is looking to pump the cash into new projects, including 12 integrated developments across Asia over the next three to four years.
Of the 12 targeted integrated developments, half would be in China, while the rest could be in Singapore, Malaysia, Vietnam and Indonesia, said the largest listed property developer in South-east Asia.
The first of these mixed-use projects is Capital Tower Shanghai. The necessary approvals have been obtained and construction will begin early next year, said group chief executive officer Lim Ming Yan. When completed in 2016-2017, this project will have a total gross floor area of 66,160 sq m comprising office, serviced residence and retail.
The group's search for opportunities beyond behemoth China has also found bright spots in Kuala Lumpur and Penang, Ho Chi Minh City and Jakarta. CapitaLand is already in Malaysia through its shopping malls and Vietnam via its residential and serviced residence businesses, where there are "initial positive returns".
"For the next three to four years, we will have a significant pipeline of projects that will turn operational that will strengthen the portfolio significantly," Mr Lim told The Business Times after the group's celebration of its 20th anniversary in Beijing.
Given some S$4 billion in cash and undrawn credit facilities and S$1.6 billion sitting in the special business units, the group has much capacity to snap up assets but it stressed that there is no need to rush.
"In the past couple of years, there were less experienced developers buying into these investment properties. At some point in time, they may decide to get out. That may be a better time for us to decide whether to get into some of these assets," Mr Lim said.
Lucas Loh, CEO of CapitaLand China, said the group is keen to work with local partners that have significant land bank in China. One of them is Shanghai Metro, the rapid transit company that owns some land plots along its metro lines in Shanghai.
CapitaLand is already in a 70-30 joint venture with Shanghai Metro to develop an integrated project on a site at Hanzhong Road in downtown Zhabei District in Shanghai, above an interchange station of three metro lines.
Mr Loh revealed that the group has also been approached by some city and district governments on the possibility of working on urban renewal projects together, after its first urban renewal project on Datansha Island with the Liwan District government in Guangzhou. Phase one of this project is likely to be ready for launch in the fourth quarter of next year.
"We are studying the possibility of these projects and in discussions on some of these projects," Mr Loh told analysts and the media in a briefing in Shanghai.
Competition for mixed-use sites in China is relatively lower and offer better margins than pure residential sites, he explained, adding that further liberalisation of China's capital market will drive greater demand for commercial properties.
CapitaLand is no stranger to mixed developments, having built four integrated Raffles City projects in Shanghai, Beijing, Chengdu and Ningbo.
Four other Raffles City projects in Hangzhou, Shenzhen, Chongqing and Changning are set to complete over the next three to four years, bringing the group's total stable of Raffles City projects in China to eight with a total value of S$12 billion on completion.
While there have long been talks in the market that the group may spin off its S$6 billion Raffles City China Fund - that holds five of the eight Raffles City projects - into a Reit, Mr Loh said the group is considering all options and has not ruled out the possibility. The fund will expire in 2018, so it is "still early days to decide on this", he said.
Unfazed by a slowdown in the Chinese economy, Mr Loh noted that the mega cities that fall within the group's five city clusters - Beijing/Tianjin, Shanghai/Hangzhou/Suzhou/Ningbo, Guangzhou/Shenzhen, Chengdu/Chongqing and Wuhan - will continue to ride the urbanisation wave.
CapitaLand is launching another 3,900 residential units in China in the next three months from its current land bank, on the view that the Chinese residential market will pick up next year.
So far, the group has seen an 81 per cent take-up for units launched in China. CapitaLand is aided by a focus on the first-time home buyers and upgraders in key cities, as well as its 70-30 exposure to tier one and tier two/three cities, Mr Loh added.
But CapitaLand is looking to improve its return on equity by using modularisation to shorten the time-to-market for residential properties to nine months - from acquiring the site to launching the project - except in Chinese cities where the building structures have to be completed before the launch.
The group's ability to weather the cyclical residential market has showed up in its financial performance, thanks to having three quarters of its portfolio in investment properties.
Its net profit for the third quarter ended Sept 30 and first nine months inched up 1.3 per cent to S$129.98 million and 7.7 per cent to S$751.5 million; separately, its serviced residence arm Ascott announced this week that it has crossed its target of 12,000 units in China ahead of 2015, and is now on track to reach 20,000 units in China by 2020.
In Singapore, breakeven prices at its Bishan condominium projects Sky Habitat and Sky Vue are still significantly below average selling prices even after discounts are offered, according to CapitaLand Singapore CEO Wen Khai Meng, who recently took over the residential portfolio.
The first extension fees will kick in for Urban Resort Condominium in March and The Interlace in September, where there are 22 units and 175 unsold units respectively as of Sept 30.
Projects in Singapore that will turn operational in the next few years include mixed-use Project Jewel at Changi and CapitaGreen office in Singapore.
Find out more at btsub.sg/btdeal