CapitaLand to list its pan-Asian retail subsidiary

CapitaLand to list its pan-Asian retail subsidiary

By Ng Baoying

SINGAPORE: Southeast Asia’s largest property developer CapitaLand says it plans to list its retail subsidiary on the Singapore Exchange.

The unit, CapitaLand Retail, will be renamed CapitaMalls Asia. It will manage a portfolio worth S$20.3 billion of 86 retail properties spread across 48 cities in Asia.

Of the 59 existing malls in its portfolio, CapitaMalls Asia will manage 16 in Singapore including ION Orchard. Thirty-two of the others are from China, and the rest are from India, Malaysia and Japan. Eventually, it plans to grow this to 86 malls, of which 50 will be in China.

CapitaLand says the proposed listing of CapitaMalls Asia will enable the group to accelerate the growth of its integrated shopping mall business.

CapitaLand Group’s president and CEO, Liew Mun Leong, said: “You can see some bad shopping malls being built in Orchard Road. Our business model is about an integrated business model that involves investing, developing them…It’s not easy to build a shopping mall, to fill it up with the right tenants and operate it successfully so that shoppers continue to come.”

Lim Beng Chee, CEO of CapitaLand Retail Limited, said: “Our capital structure is positioned for growth. We have a very low gearing upon listing and it gives us a lot of firepower to grow the business going forward. We will continue to be a member of CapitaLand Group - that is, we are able to tap on CapitaLand’s areas of expertise outside the shopping mall business and outside the 5 countries we are operating.”

CapitaLand says it will retain majority control in CapitaMalls Asia after the listing and for the foreseeable future. But it intends to offer an adequate number of shares that it holds in CapitaMalls Asia to ensure that there is sufficient liquidity in the counter.

Donald Han, managing director of Cushman & Wakefield, said: “If you look at the Asian market, certainly, we’ve got groups like Westfield in Australia who’ve done very well in Australia, they’ve also gone into markets like US. They’ve put a stamp on the market.

“If you look at Asia outside Australia, there’re not as many retail mall expert developers who’ve gone into the process of developing and raising funds through the IPO route. So for retail investors wanting to partake in the retail market, there are not many opportunities to invest. This will be one of the very few opportunities.”

He added: “It’s a timely move for CapitaLand, because if you look at the market landscape there are a lot of opportunities in the marketplace at a discounted price. What CapitaLand is doing is to shore up its balance sheet to raise cash and to use CapitaMalls Asia as a platform to acquire, develop and ultimately to manage retail malls in Asia-Pacific.

“In China, the fact that CapitaLand has been there over eight, nine years, it has pretty much tested waters, built a good brand name and reputation. Even among some of the retail developers, it is ranked easily in the top five category. If you look at a name like CapitaLand coming into Singapore, obviously there is an assurance in terms of the quality.”

By creating a listed entity, CapitaLand says the shopping mall business will have significant financial capacity, direct access to capital markets and complete in-house capabilities in retail real estate investment, development, mall operations, asset management and fund management.

CapitaLand says the capital value of malls in China is worth only about S$200 per square foot, compared to Singapore’s S$1,500 per square foot.

“Can you imagine when China’s malls double up in capital value, when the malls are more matured and operating and generating income, you can see the growth potential of this company. The growth in China is to us very, very attractive,” said Mr Liew.

CapitaLand says it does not rule out another listing in the future, possibly in China, should market and regulatory conditions become conducive.

- CNA/ir

Source : Channel NewsAsia - 06 October 2009

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Koh Brothers clinches S$51.9m project from HDB

Koh Brothers clinches S$51.9m project from HDB

By Jonathan Peeris

SINGAPORE: Singapore-listed property firm, Koh Brothers, said on Monday it has bagged a S$51.9 million contract from the Housing and Development Board (HDB).

This is for the construction of four blocks of 16-storey residential buildings, one substation and one multi-storey carpark in Choa Chu Kang.

In January this year, the company clinched a S$145 million contract from HDB for the construction of Part 1 of the Punggol Waterway. It secured Part 2 of the same contract, worth S$59 million, in July.

Works on the latest project will commence this month and is expected to be completed by the end of 2011.

- CNA/so

Source : Channel NewsAsia - 06 October 2009

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CapitaLand wins nod to list mall business

CapitaLand wins nod to list mall business

Retail arm to be renamed CapitaMalls Asia; IPO may raise $1.4 billion

By Jessica Cheam

PROPERTY developer CapitaLand yesterday unveiled an ambitious plan to list its retail arm, which could raise an estimated US$1 billion (S$1.4 billion) via an initial public offering (IPO).

In a move seen as reflecting growing confidence in Asia’s shopping mall business, CapitaLand announced it had won the Singapore Exchange’s approval to list the shares of CapitaLand Retail, which will now be renamed CapitaMalls Asia (CMA).

The group’s decision to hive off its retail arm will allow it to accelerate the growth of its integrated shopping mall business, which will have direct access to capital markets, said chief executive officer Liew Mun Leong yesterday.

CapitaLand is expected to list 20 per cent to 30 per cent of CMA in an offering that Reuters said could raise at least US$1 billion.

This could take place by year-end or early next year, said chief financial officer Olivier Lim. He said it was too early to put a valuation on CMA. It is likely that the firm will seek shareholder approval for the proposal by the end of the month.

CapitaLand Retail’s net asset value as of end-June stood at $5.3 billion.

Its listing will be Singapore’s biggest IPO in recent times and signals a recovery in an IPO market that has languished since last year’s global financial crisis. It could possibly exceed that of Thai Beverage, which raised $1.37 billion in May 2006.

When listed, CMA will be one of Asia’s few pure-play shopping mall businesses by property value and geography. It will manage and have stakes in a portfolio of malls across Asia with a total property value of $20.3 billion.

Consisting of 86 retail properties spanning 48 cities in five Asian countries, it will count luxury mall Ion Orchard in Singapore’s Orchard Road as one of its recent high-profile developments.

Industry analysts expect the listing to be well received due to the attractive Asia growth story, especially in China and India.

DMG Research property analyst Brandon Lee said: ‘The move is generally quite positive, as it allows potential investors to participate in the potential upside of the greenfield malls CMA has in its portfolio.’

Another analyst, who declined to be named, noted that retail-based real estate investment trusts (Reits) have been the best performers of late.

‘It says that the market still loves the Asia retail story,’ he added.

CapitaLand’s Mr Liew told the media and analysts yesterday that CapitaLand sees tremendous long-term potential in Asia’s shopping mall sector.

With about 57 per cent of the world’s population, Asia is expected to experience strong growth in this industry, fuelled by rapid urbanisation, increasing affluence and spending power, he said.

Since 2002, CapitaLand’s retail business has grown tenfold, from about $1.8 billion to $20.3 billion as of end-June.

CapitaLand also revealed yesterday that it was looking at issuing a special dividend to shareholders, once it had considered various factors, including the gain following the listing.

Mr Liew emphasised that the listing was going to benefit the group, as it will ‘crystallise a gain… and unlock significant shareholder value’.

This will increase the overall financial capacity and flexibility of the real estate firm, he said.

CMA will assume control of CapitaLand’s retail real estate fund and property trust management business. So, ownership of the Reit managements of CapitaMall Trust and CapitaRetail China Trust will fall under CMA’s umbrella.

Both Reits will retain the existing rights-of-first-refusal on the acquisition of assets from CMA.

The new entity will give the company the potential to take on debt of $1.6 billion to $2.6 billion, allowing CMA to fund expansion plans across Asia.

CapitaLand chairman Richard Hu said in a statement that the proposed listing is ‘a logical evolution of CapitaLand’s business model… and is the right step to make CapitaLand one of the most successful real estate companies in Asia’.

Source : Straits Times - 06 October 2009

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Awards for 8 restoration projects

Awards for 8 restoration projects

Govt announces four new areas for conservation

THE Urban Redevelopment Authority (URA) yesterday unveiled eight winners of this year’s Architectural Heritage Awards (AHAs) and announced four new areas that will be conserved.

Architectural Heritage Award winners: They include Capella Singapore at Sentosa (above) and Ascott Singapore Raffles Place (next) at 2 Finlayson Green Govt announces four new areas for conservation
The restoration projects that took home prizes are: Ascott Singapore Raffles Place at 2 Finlayson Green; Capella Singapore at Sentosa; Bukit Timah Guild House at 1F Cluny Road; Beulah House at 10 Gilstead Road; the former Victoria School at 9 King George’s Avenue; the Indian High Commissioner’s bungalow at 2 Peirce Road; a townhouse at 128D Cairnhill Road and shophouses at 92-102 Joo Chiat Place.

The AHAs recognise owners, architects, engineers and contractors who have sensitively restored heritage buildings for present-day use.

The awards aim to promote the restoration of monuments and buildings. Since they were launched in 1995, 92 projects have been recognised.

‘We worked closely with the URA to earmark several key aspects of the building for conservation,’ said Ascott chief development officer Wong Hooe Wai. Ascott acquired the former Asia Insurance Building in 2006 and carried out restoration works worth $60 million to preserve the tower.

‘The original Art Deco architecture and distinctive interior features have been retained to recapture the former glory of the building,’ Mr Wong said.

In a speech yesterday, Senior Minister of State for National Development and Education Grace Fu also announced the conservation of four new areas.

They are: four shophouses along North Bridge Road at the junction of Liang Seah Street; the Church of St Bernardette at Zion Road; the cowshed and farmhouse at Dairy Farm Road; and 30 pre-war army bungalows in Rochester Park and 13 bungalows in neighbouring Nepal Park.

Source : Business Times - 06 October 2009

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For local banks, the worry is loans growth - not capital

For local banks, the worry is loans growth - not capital

Global drive to raise capital requirements for banks may leave S’pore untouched

By SIOW LI SEN

(SINGAPORE) Local banks are already very well capitalised. So the global trend of making banks safer is more likely to result in tweaking of the rules here, rather than the imposition of additional requirements, analysts say.

The Tier 1 ratio of the three local banks (DBS Group Holdings, United Overseas Bank and OCBC Bank) - ranging from 12.6 to 15.4 - is more than double the minimum 6 per cent requirement. ‘There may be an enhancement or refinement, but no additional requirement which will have an impact on their operations. MAS has to be seen to be globally compliant,’ said Tay Chin Seng, Macquarie bank analyst.

The Monetary Authority of Singapore (MAS) is already a very strict regulator. So whatever new capital or operating guidelines that may emerge eventually (after probably months of global regulator negotiations), they are unlikely to materially affect the Singapore banks, said Anand Pathmakanthan, Nomura Asia, Asean banks analyst.

Last Friday, MAS managing director Heng Swee Keat said global regulators are looking to strengthen the banking system and considering a minimum global liquidity standard to address liquidity concerns.

‘MAS is involved in the discussions on both the capital and liquidity proposals, and supports the broad thrust of these initiatives,’ Mr Heng said.

The issue facing the three local banks is not capital, but sluggish loans growth.

‘As underscored by August 2009 system data, loans growth is weak and non-performing loans (NPL) pressure contained,’ said Mr Pathmakanthan. August loans growth was 2.5 per cent while the three banks’ first-half 2009 gross NPL averaged below 2.5 per cent.

‘Coupled with already ample capital backing and one of the lowest leverage ratios in the region, Singapore banks need to reverse their current return on equity-sapping deleveraging trend, not compound it,’ Mr Pathmakanthan said.

Given the local banks’ strong balance sheet, they won’t need to raise capital, said BNP Paribas analyst Ng Wee Siang.

‘OCBC Group remains strongly capitalised, with Tier 1 ratio of 15.4 per cent and total adequacy ratio of 15.9 per cent as at June 30, well above the regulatory minimums of 6 per cent and 10 per cent,’ said Koh Ching Ching, the bank’s head of group corporate communications. Core Tier 1 ratio (excluding perpetual and innovative preference shares) was 11.3 per cent, she added.

A United Overseas Bank (UOB) spokeswoman said: ‘We are currently well capitalised and are comfortable with our capital position. We will continue to monitor developments on the international front.’

DBS chairman Koh Boon Hwee said last week that banking business in the future would not be as lucrative as it was before the onset of the current global recession, sparked by reckless lendings. He said capital requirements for banks would go up, and returns would come down.

Macquarie’s Mr Tay noted that DBS is having problems deploying its capital. Last December, the bank raised $4 billion through a rights issue.

Reporting its H1 2009 results in August, DBS said net customer loans after deducting allowances for bad loans fell 2 per cent in the quarter, reversing a 3.2 per cent increase in the first three months of the year.

DBS and OCBC fell yesterday, down 1.4 per cent and 1.18 per cent to $12.60 and $7.51 respectively. UOB rose 0.86 per cent to $16.44.

Source : Business Times - 06 October 2009

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CapitaLand to spin off retail arm and list it

CapitaLand to spin off retail arm and list it

CapitaMalls Asia aims to speed up growth with special focus on China

By UMA SHANKARI

(SINGAPORE) Singapore’s largest property group CapitaLand will spin off its $20.3 billion retail portfolio into a separate unit, which will be listed on Singapore Exchange.

The group’s retail arm CapitaLand Retail will be renamed CapitaMalls Asia (CMA), and will have a Pan-Asian portfolio of 86 retail properties. The new company will take the lead on all future retail activities while CapitaLand will focus on non-retail businesses.

Announcing the plans yesterday, CapitaLand chief executive Liew Mun Leong said that this was the ‘most important announcement since we were listed 10 years ago’.

He added: ‘I can’t think of any (other) announcement that has had such a big impact on the group.’

CapitaLand said the proposed listing of CMA will allow the group to accelerate the growth of its integrated shopping mall business.

‘The announcement is light on details but we think this is positive for CapitaLand because Asian retail is a strong growth area they can capitalise on.’

- Soong Tuck Yin,
Macquarie analyst

Since 2002, CapitaLand has increased ten-fold the total value of its owned and managed retail property portfolio, from $1.8 billion then to $20.3 billion as at end-June 2009. These malls will now be held by CMA instead.

While the overall portfolio value of the malls in which CMA has a share (including minority interests) as well as it manages is $20.3 billion, CMA’s effective interest in the properties is a much smaller $7 billion. And the book cost of the properties is $5.3 billion.

CapitaLand plans to retain its control over CMA and would be ‘comfortable’ selling just 20-30 per cent of the company in the initial public offering (IPO), chief financial officer Olivier Lim said in a briefing.

This means that CapitaLand should raise at least $1 billion from CMA’s IPO, assuming a 20 per cent float at book cost.

Mr Lim said that it is too early to discuss the valuation of CMA and that the company ‘can be patient’ regarding the timing of the listing. CMA could have an estimated debt-to-equity ratio of 0.3 times to 0.5 times, which would give the company the potential to take on debt of about $1.6 billion to $2.6 billion, Mr Lim added.

This will allow CMA to grow by buying land for new developments or purchasing completed malls, for example.

The transaction will also reduce CapitaLand’s borrowings and raise its cash levels, Mr Lim said.

After the IPO, CapitaLand shareholders could receive a potential special dividend - depending on the gain from the planned listing as well as CapitaLand’s overall cash position, gearing and the business plans and capital requirements of the other business units.

CMA’s portfolio comprises 59 completed malls in Singapore, China, Malaysia, Japan and India. Another 27 properties are currently being developed. More than half of all malls are in China, which is expected to provide the engine of growth for CMA.

‘One of CapitaMalls Asia’s key growth markets will be China, where we have an early-mover advantage, having built up an extensive network of tenants, contacts and knowledge of local market conditions,’ said Mr Liew.

He added that CapitaLand will consider a secondary listing for CMA on another stock exchange, possibly in China, ‘in time to come’.

Analysts were surprised by CapitaLand’s decision to spin off its retail arm into a separate listed entity, but said that the move could pay off for both companies.

The listing of CMA provides much more clarity on the valuation of the overall retail business which today makes up 22 per cent of CapitaLand’s business, said Macquarie analyst Soong Tuck Yin.

‘The announcement is light on details but we think this is positive for CapitaLand because Asian retail is a strong growth area they can capitalise on, and CapitaMalls Asia could provide investors with a direct entry into the high-growth Asian retail business for which there are very few pure-play vehicles,’ he said.

For the two retail real estate investment trusts (Reits) now under CapitaLand Retail, it will be business as usual. The group’s stakes in CapitaMall Trust and CapitaRetail China Trust will be held under CMA in future. Both Reits will continue to enjoy the existing rights of first refusal they have from the group.

CapitaLand also said that its retail real estate fund and Reit management business will be transferred to CMA to create an integrated business model focused in the retail real estate sector.

‘Given that the entire retail real estate business platform is proposed to be spun off in its entirety, there should be very limited impact on the operation/ management of both Reits,’ said JPMorgan analysts Joy Wang and Christopher Gee in a note.

CapitaLand shares were suspended from trading yesterday.

Source : Business Times - 06 October 2009

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