CapitaLand (SGX:C31) will be increasing its exposure to China in new economy assets by S$3.5 billion to S$5 billion over the next few years, using capital unlocked from asset recycling. It aims to position itself to ride on China’s economic transformation which focuses on technology, services and domestic consumption.
Investments will include business parks, logistics and data centres, where tenants typically hail from new economy sectors that enjoy robust fundamentals and a supportive regulatory environment.
CapitaLand Retail China Trust (SGX:AU8U) (CRCT) has been designated the Group’s dedicated real estate investment trust (REIT) platform for non-lodging assets in China, with access to CapitaLand’s extensive pipeline in the country. CRCT will also continue to explore opportunities from third parties and acquire from the market to reinforce its leading position as Singapore’s largest China-focused REIT with a target portfolio mix of 40% in integrated developments, 30% in retail and 30% in new economy (business parks, logistics and data centres).
As announced on 6 November, CapitaLand, through its associates, has entered into agreements to divest its share of interest in the companies which hold five business park properties and Rock Square mall in China to CRCT. Upon the completion of the proposed divestment, CapitaLand plans to enter into a 49:51 joint venture with CRCT on Ascendas Xinsu Portfolio, with a view to extract new value from this mature asset through redevelopment.
As seen from COVID-19, new economy tenants are relatively better able to withstand cyclical headwinds and CapitaLand will be broadening their exposure to these assets to create a balanced and diversified portfolio across asset classes and geographies.
“In China, we continue to see many compelling opportunities in the new economy sector, whose prospects have been boosted by favourable government policies and robust demand. As CapitaLand continues to recycle our assets, part of the unlocked capital will be redeployed to pursue business parks and other new economy asset opportunities, which will form the pipeline for future recycling,”Mr Lucas Loh, President, China, CapitaLand Group
Mr Loh added: “In line with our strategy to ramp up CapitaLand’s investments in business parks, we plan to co-invest with CRCT in Ascendas Xinsu Portfolio. This signature project will provide CapitaLand with a platform to grow our share of business park assets under management, while investing part of the recovered capital for higher returns. Located in the well-established Suzhou Industrial Park, Ascendas Xinsu Portfolio is a landmark business park development with strategic value and significant redevelopment potential. Within the portfolio, we have previously redeveloped Xinsu Square by maximising the under-utilised plot ratio, resulting in a 48% increase in gross floor area. We will progressively explore replicating the successful value creation achieved in Xinsu Square with the other buildings, in tandem with market demand.”
Located in Suzhou Industrial Park, Ascendas Xinsu Portfolio comprises six locations with 61 buildings, including business parks and industrial portion. The sprawling portfolio has a total gross floor area of 373,334 square metres. Building on Ascendas-Singbridge’s decades-long expertise in operating business parks in China, CapitaLand has established and continues to invest in a professional and efficient property management system valued by tenants. As a testament to CapitaLand’s property management capabilities, its long-time tenants include leading multinational corporations and domestic firms that have been with its business parks for more than 15 years. Such tenancy stickiness is also attributed in part to CapitaLand’s strong operating network across geographies and asset classes, which is well-positioned to support tenants’ expansion plans and growth needs.
CapitaLand (SGX:C31) was trading at $2.90, an increase of 2.11% on 16 November at time of writing.