CapitaLand is seeking shareholders' approval for the privatisation of its real estate development business.

 

SINGAPORE - Shares of CapitaLand were traded heavily on Monday (July 19) after the company filed notices for an extraordinary general meeting and a scheme meeting on the Singapore Exchange (SGX) the day before.

 

CapitaLand is seeking shareholders' approval for the privatisation of its real estate development business and listing of its fund management and property investment arm.

 

The shares closed at $3.88, up seven cents, or 1.84 per cent, from the previous close. More than 18 million shares exchanged hands during the day. 

 

The company first proposed the restructuring in March. Notices of the meetings, which will be held on Aug 10 at 2pm, were issued after Evercore Asia (Singapore), CapitaLand' s independent financial adviser, said last Saturday (July 17) that the proposal is " fair and reasonable" and recommended shareholders vote in favour of the deal.

 

If approved, the deal is expected to unlock better value for CapitaLand shareholders, whose shares have been trading at a 20 per cent to 25 per cent discount to net asset value (NAV) in recent years, CapitaLand group chief executive Lee Chee Koon said.

 

The listed entity, which will be called CapitaLand Investment (CLI), will also be the largest real estate investment manager on the local bourse with $115 billion in assets under management.

 

The new CLI business model will comprise two revenue segments: fee income through asset management and lodging management, and real estate investments.

 

For every CapitaLand share held, eligible shareholders will receive one CLI share, 95.1 cents in cash and 0.155 units in CapitaLand Integrated Commercial Trust (CICT). This works out to be a total of $4.102 in value per share.

 

CICT is the largest real estate investment trust listed on the SGX. It owns a total of 22 retail and office properties in Singapore and two in Frankfurt, Germany.

 

After a capital reduction exercise, CapitaLand will distribute approximately 48.24 per cent of the issued ordinary shares in the capital of CLI to eligible shareholders, while CapitaLand will own the remaining 51.76 per cent stake.

 

Mr Lee said the restructuring is a " logical next step" to accelerate the growth of CapitaLand' s businesses and is expected to enable CLI shares to trade closer to its NAV.

 

He added that since the start of the year, CLI has increased its funds under management (FUM) by over $1 billion as at March 31, with a focus on new economy assets such as data centres and logistics parks.

 

As at December 31 last year, CLI' s FUM was approximately $78 billion, with more than 80 per cent of its assets located in Asia. By 2024, it aims to raise its FUM to $100 billion.

 

CLI currently oversees more than 330 commercial/integrated and new economy buildings spanning more than 18 million sq m of gross floor area, as well as approximately 123,000 lodging units.

 

Meanwhile, the company has also announced over $11.2 billion in gross divestments year to date, which is three times higher than the company' s annual recycling target of $3 billion.

 

This includes the divestment of partial stakes in six of its Raffles City developments in China to Ping An Life Insurance Company of China for 46.7 billion yuan (S$9.8 billion) in June.

 

CapitaLand has also successfully registered as a private equity fund manager in China. Mr Lee said the fund management licence will enable it to tap a huge capital base in the country and benefit from its growth potential.

 

He added that CapitaLand' s deal with Ping An demonstrates its ability to work with partners in China and has since generated a high level of interest from other investors.

 

" All these initiatives are already contributing to NAV upside for CLI. This restructuring not only unlocks immediate value for shareholders, it is also intended to unleash longer-term value as listed real estate investment managers generally trade at a premium to their NAVs in the capital markets" , CapitaLand said.

 

If approved, the restructuring is expected to be completed around mid-September, after which CapitaLand will be delisted from the SGX.

 

CAPITALAND Investment (CLI) is aiming to achieve S$100 billion in funds under management (FUM) by 2024 and grow its lodging business to 160,000 units under management by 2023, up from S$78 billion FUM and 123,000 units in 2020.

 

This growth will be driven by multiple engines, namely organic growth, CLI' s pipeline of real estate assets under management (AUM) of S$10.1 billion, right of first refusal (ROFR) to CapitaLand Development' s pipeline of completed assets up to S$7.6 billion, as well as strategic acquisitions, property developer CapitaLand' s management highlighted in a briefing on Monday.

 

In March, CapitaLand announced it was planning to divide its business into a privately-held development arm, and a new, listed unit (CLI) for its fund management and lodging management businesses as well as its real estate investments.

 

For every one CapitaLand share held, shareholders will receive one CLI share, S$0.951 in cash as well as 0.155 unit in CapitaLand Integrated Commercial Trust (CICT). The implied value per share for CapitaLand shareholders is S$4.102.

 

CLI' s fee income-related business will comprise FUM of S$78 billion and lodging assets under management of S$27.7 billion, while its real estate investments comprise its stakes in listed funds with a S$7.7 billion market value and stakes in unlisted funds with a carrying value of S$5.5 billion.

 

CLI' s pro forma net asset value for FY2020 works out to S$15.1 billion, of which S$1.2 billion comprises its fee income-related business and its real estate investments, S$13.9 billion. Its FY2020 revenue and EBITDA stand at nearly S$2 billion and S$1.3 billion, respectively.

 

In a letter to shareholders on July 17, independent financial adviser Evercore Asia described the value of the deal as fair and reasonable. It also pointed out that under the planned scheme, shareholders would effectively own a direct stake in a company with lower leverage CLI' s pro forma net debt-to-equity ratio is 0.56 times compared to CapitaLand' s net debt-to-equity ratio of 0.68 times as at Dec 31, 2020.

 

CapitaLand has called for an extraordinary general meeting (EGM) on Aug 10 for shareholders to vote on the planned transaction. The independent directors have recommended that shareholders approve both a capital reduction exercise and a scheme of arrangement at the upcoming EGM.

 

Meanwhile, the listing of CLI is expected to take place on or around Sept 17. With AUM of about S$115 billion, CLI is expected to be the largest real estate investment manager (REIM) in Asia, and the third-largest listed REIM company globally.

  CapitaLand had proposed to split its business into a privately-held real estate development arm.

 

  Property giant CapitaLand' s restructuring plan is " fair and reasonable" , the independent financial adviser (IFA) in the deal said in a letter on Saturday (July 17).

 

The company' s independent directors have thus recommended that shareholders give the green light to both a capital reduction exercise and a scheme of arrangement when they vote on the planned transaction next month.

 

CapitaLand in March proposed to split its business into a privately held real estate development arm, as well as a new, listed unit for investment management platforms and lodging.

 

Proposed entity CapitaLand Investment Ltd (CLI) would become the largest real estate investment manager (REIM) on the Singapore bourse, with pro forma real estate assets under management of some $115 billion as at Dec 31, 2020, the group earlier stated.

 

Now, Evercore Asia (Singapore), the IFA, has called the value of the deal fair and reasonable from a financial point of view, as of the latest practicable date.

 

The IFA added in its letter that independent directors may wish to advise shareholders that they can also choose to sell their shares on the open market, if they can get a higher price.

 

CapitaLand also said on July 17 that it would hold an extraordinary general meeting and a scheme meeting on Aug 10, starting at 2pm, for shareholders to decide on the planned transaction.

 

Shareholders can ask questions during the meetings - which will be held electronically - or submit queries in advance by Aug 7.

 

They must also register for the two meetings, and complete their proxy forms for voting, by the same deadline of Aug 7.

 

Under the planned scheme, shareholders would effectively own a direct stake in a company with lower leverage, the IFA observed, in laying out factors behind its opinion.

 

It was comparing the pro forma net debt-to-equity ratio of 0.56 times for CLI, against CapitaLand' s net debt to equity of 0.68 times as at Dec 31, 2020.

 

The IFA also noted that the implied value in the deal includes both a consideration of $4.102 a share, and the financial year 2020 dividend for those who held shares by May 4.

 

The implied consideration represents a premium over the volume-weighted average price up to date of the restructuring announcement, as well as a premium over average target prices from research analysts, the IFA said.

 

It added that eligible shareholders stand to receive value for their indirect stake in CapitaLand' s development business, which will be privatised by the offeror.

 

That consideration falls within the price-to-net asset value (NAV) ratio range for similar precedent deals, it said in its letter, while citing the privatisation of Perennial Real Estate Holdings, Wheelock Properties (Singapore), CapitaMalls Asia and Singapore Land.

 

Evercore also said that, with the transaction, CLI will " retain the benefit of being part of the ecosystem with the privatised CapitaLand" - such as strategic arrangements for opportunities in the development projects that the privatised CapitaLand pursues.

 

Meanwhile, CapitaLand group chief executive Lee Chee Koon said in a statement: " This restructuring not only unlocks immediate value for shareholders, it is also intended to unleash longer-term value as listed REIMs generally trade at a premium to their NAVs in the capital markets.

 

" We ask for shareholders' support in this transformative transaction. With our shareholders continuing to participate in the growth of CLI, we are confident that CLI will be able to thrive under CapitaLand' s unique ecosystem."

 

Should shareholders and regulators give the go-ahead, Capitaland is expected to complete the deal around mid-Sept 2021.