Capitaland Commercial C Reit Opens 196 Higher Shanghai Stock Exchange
CapitaLand Commercial C-REIT (CLCR), the eighth listed fund of CapitaLand Investment (CLI), was greeted with a strong response by investors as it opened on the Shanghai Stock Exchange (SSE) at RMB6.84, 19.6% higher than its initial public offering (IPO) price on Sept 29.
The IPO raised RMB2.29 billion ($409 million) for the fund by issuing 400 million units at RMB5.718 per unit, which exceeded the initial estimate of RMB2.14 billion. Based on the IPO price, CLCR is expected to have a distribution yield of 4.40% for FY2025 ending Dec 31 and 4.53% for FY2026.
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CLCR is the first international-sponsored retail C-REIT in China, and its offline institutional tranche was oversubscribed 253 times earlier this month, setting a new record among retail C-REITs in the country. The IPO also saw strong retail interest, with the public tranche being 535.2 times subscribed and closing ahead of schedule.
Speaking in Mandarin at CLCR’s listing ceremony, CLI China CEO Puah Tze Shyang said that the oversubscription “underscores the market’s dual recognition of CLI’s asset management capabilities and the resilience of China’s consumer market”. Puah added, “Although we bring over 20 years of REIT management expertise, we believe that respect is earned, not given, and we remain committed to earning our stripes.”
In China, institutional investors participating in the bookbuilding exercise are referred to as offline institutional investors, while those subscribing through the public tranche are known as online institutional investors. Majority of the IPO units were allocated to insurance companies, securities firms, and “strategic capital investors”, according to CLI. Representatives from DBS and HSBC also attended the listing ceremony on Sept 29.
As per CLI’s Sept 12 announcement, cornerstone investors took up 40.11% of the units, while offline institutional investors were allotted 27.92% in the bookbuilding tranche. Online institutional investors subscribed for the remaining 11.97%. It is worth noting that only Chinese investors can invest in CLCR, and CapitaLand China Trust (CLCT) is a diversified multi-asset class vehicle targeting global investors, with an investment mandate that spans across Greater China. On the other hand, CLCR invests exclusively in retail assets in mainland China, targeting domestic investors.
CLI, CLCT, and CapitaLand Development (CLD) collectively hold a 20% interest in the IPO units. In particular, CLCT has subscribed for a 5% strategic stake in CLCR at the IPO price of RMB5.718 per unit. Puah stated to Singaporean media, “When you combine CLCR and CLCT, what is interesting is that [CLCT] is a REIT-of-REITs.” He further added, “We serve foreign investors wanting China exposure through its stake in CLCR. It also serves a purely domestic, institutional and retail clientele, but when you switch over, we also have insurance capital that feels a bit like a CLCT because it’s diversified, but it will then allow us to take on a little bit more risk.”
To seed CLCR’s IPO portfolio, CLI and CLD have divested CapitaMall SKY+ in Guangzhou and CLCT is divesting CapitaMall Yuhuating in Changsha into CLCR. CLI expects the divestment to be legally complete by the end of October. CapitaMall SKY+ is a commercial property located in Guangzhou’s Baiyun Central Business District, directly connected to Baiyun Park subway station, while CapitaMall Yuhuating is a community mall situated in Changsha’s Yuhua District and accessible via two adjacent subway stations on two lines as well as a upcoming subway station on a third line. The two malls have a combined value of approximately RMB2.6 billion. They span a total gross floor area of 168,405 sqm and have a committed occupancy rate of 96%.
As the sponsor and the asset manager of CLCR, CLI will continue to operate CapitaMall SKY+ and CapitaMall Yuhuating. Additionally, it plans to support the growth of CLCR and CLCT through the provision of a “quality pipeline of potential assets”. In China, CLI manages 43 operational retail properties across 18 cities, with total retail assets under management of approximately $18 billion.
The China Securities Regulatory Commission and National Development and Reform Commission have progressively launched C-REITs across different sub-sectors since June 2021. Including CLCR, there are now 75 C-REITs across various asset classes, including rental housing and logistics, with a total market capitalisation of RMB221 billion as of Sept 19.
Retail C-REITs were launched in March 2024 under the broader “consumer infrastructure” or “consumption” labels. Since then, 10 retail C-REITs have listed, but with only one retail asset each in line with Chinese regulations. Among them is Harvest Wumart Consumer REIT, which listed on the SSE in March 2024 with a retail asset located in the central urban area of Beijing.
CLCR along with its peers faces a one-year moratorium from its listing date, which blocks new acquisitions. Puah reported that the regulators could be looking at halving this period. “For now, we are just waiting [to see] whether we can start to inject more stabilised, quality assets after six months, rather than a year.” The earliest retail C-REITs, which have spent a year and a half on the market, are preparing to expand their portfolios. The sponsor of China Resources Mall REIT, which listed on the Shenzhen Stock Exchange in March 2024, has identified and announced their next injection of assets, adds Puah.
CLCR is the first retail C-REIT to list with two assets in its IPO portfolio. Puah believes this concession will allow CLCR to show that “scale and diversity are important”. He said, “We bring forward this message to the regulator, but we are still bound by national rules.” He also added, “The market appreciates us as well because we clearly have a pipeline… If I’m a C-REIT investor, I would definitely look towards someone — a sponsor — who is able to add scale and diversity because that really protects the performance of the C-REIT.”
According to Puah, CLI is “very open” to working on a ninth listed fund, but the “first order of business” is to “make sure CLCR trades well”. He stated, “We are always looking out for how the market changes [and] how the market evolves. We are in the business of running the largest REIT franchise in Asia Pacific. So, if there’s a chance for me to add to [CLI’s] REITs [funds under management], yes, we will do it.”
CLI has closed the first sub-fund, China Business Park RMB Fund IV, under its inaugural onshore master fund in China. Established in May with a major domestic insurance company as a co-investor, the Master Fund has RMB5 billion in total equity commitment and invests in a series of sub-funds that acquire income-producing assets with long-term growth potential. In a Sept 29 announcement, CLI said that the China Business Park RMB Fund IV closed with an equity commitment of RMB529 million from the Master Fund. As part of its capital recycling strategy, CLI has divested a business park into this sub-fund.
CLI also has plans to launch a second sub-fund focused on retail assets in 4Q2025 with a target equity commitment of RMB900 million. Puah commented that CLI has a pipeline of retail assets, logistics parks, and rental housing across Tier 1 and top Tier 2 cities that could potentially provide growth opportunities for this platform. He added, “The listing of CLCR and the continued growth of our RMB Master Fund demonstrate strong momentum in our capital recycling journey and pivot to asset-light business model. The listing of CLCR and our RMB funds also support our domestic-for-domestic fund strategy to tap into China’s substantial capital market to grow our funds under management and recurring fee income.”