WE refer to the Hock Lock Siew commentary, ‘Spinoff by CapitaLand: Will Reit units lose out?’ (BT, Oct 8).
We would like to assure investors that the business model and financial performance of CapitaMall Trust (CMT) and CapitaRetail China Trust (CRCT) will not be affected by the listing of CapitaMalls Asia (CMA).
Being real estate investment trusts (Reits), CMT and CRCT offer stable and sustainable distributions, primarily from the rental income derived from their portfolio of properties.
Further, they will continue to enjoy the right of first refusal for CMA’s completed and stabilised shopping mall pipeline in Singapore and China respectively.
CMA, on the other hand, will primarily focus on the development or redevelopment of shopping malls (including greenfield malls) and the management of retail property funds. Its focus will be more on growth and less on dividend payout – similar to other real estate development companies.
The three listed entities have different investment mandates and will cater to investors with different risk-return appetites.
CMT offers investors exposure to stable and sustainable distribution streams from operational shopping malls in Singapore, with growth through asset enhancements and acquisition of income-producing properties.
Under current Reit regulations, CMT is not allowed to incur any development costs that exceed 10 per cent of its asset value.
As a Reit, CMT enjoys tax transparency and investors enjoy preferential tax rates. Individual local investors do not have to pay tax on distributions.
CRCT has a similar business model as CMT and comes under the same Reit regulations.
However, its mandate is to own and acquire income-producing shopping malls in China, where it currently has a portfolio of eight shopping malls in five key cities.
Thus, both Reits listed in Singapore offer stable returns to investors that are substantially higher than what would be offered if they placed their money in bank fixed deposits.
This provides investors annuity income as opposed to stocks that offer development profits and growth such as CMA.
CMA, currently known as CapitaLand Retail Ltd, is an existing strategic business unit of CapitaLand Ltd. Upon listing, CMA will offer investors an integrated pan-Asian shopping mall exposure to take advantage of Asia’s rising middle-income consumer spending class.
CMA investors’ exposure will be wide-ranging, including the development of new shopping malls and management of completed malls in Singapore, China, Malaysia, Japan and India; and the establishment, sponsorship and management of retail property funds, as well as the existing holdings in CMT and CRCT.
In all, CMA will provide exposure to a multi-country and development portfolio.
Upon listing, CMA will have the financial capacity to accelerate the growth of its shopping mall business. CMT and CRCT will benefit as they continue to enjoy the existing right- of-first-refusal arrangement from CMA.
Basskaran Nair
Senior vice-president
Corporate communications & marketing
CapitaLand Group
Source : Business Times – 9 Oct 2009
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