CapitaLand has agreed to divest its share of interest in a group of companies that hold an agreed value of RMB8.37 billion ($1.7 billion) through 20 retail assets in China, each with an average gross floor area (GFA) of about 40,000 sq m excluding car parks.
The transaction is expected to be completed in 2Q18 and generate for the group net proceeds and a net gain of about $660 million and $75 million respectively.
In a Friday announcement, CapitaLand says the move comes as part of its portfolio reconstitution strategy, as the divestment would help to optimise its shopping mall portfolio to gear up for future growth.
The 20 retail assets are spread across 19 cities in China, of which 14 are noncore cities where CapitaLand has a single mall in each.
CapitaLand says the loss of recurring income from its divestment of these assets will be limited, as the malls account for approximately 4% and 7% of CapitaLand’s respective total and China shopping mall portfolio valuation as at end-June 2017.
Post-divestment, CapitaLand’s shopping mall network in China will comprise 49 malls, of which 45 are located in first- and second-tier cities. More than half of the malls are the retail component of integrated developments.
In the view of Jason Leow, Group COO of CapitaLand, this would allow the group to better optimise its resource allocation to build meaningful scale in the core city clusters under CapitaLand’s China strategy: Beijing/Tianjin, Shanghai/Hangzhou/Suzhou/Ningbo, Guangzhou/Shenzhen, Chengdu/Chongqing/Xi’an, and Wuhan.
Commenting on the divestment, Lim Ming Yan, President and Group CEO of CapitaLand, adds the group is seizing a window of opportunity to reconstitute its mall portfolio with a sharper geographical focus, given how China is now “sitting on the cusp of transformative changes to its retail industry, characterised by a burgeoning middle class and the rising popularity of omni-channel retailing”.
“We will continue to invest in dominant assets in core Chinese city clusters, where we already enjoy a competitive advantage. The rejuvenated portfolio will enable CapitaLand to respond more effectively to the paradigm shifts in Chinese consumer behaviours, and strengthen our position as we continue to tap the growth in China’s rapid urbanisation,” he adds.
This story, by Michelle Zhu, first appeared on The Edge Singapore.