CapitaLand Investment’s launch of new C-Reit comes as it takes long-term view of China business

[SINGAPORE] CapitaLand Investment (CLI) holds a long-term view of its business in China where it has built a strong foundation as part of the CapitaLand Group for over 30 years, said CLI’s group chief executive officer Lee Chee Koon.

Earlier this month, CLI announced it will launch its first real estate investment trust (Reit) in China with two major malls valued at 2.8 billion yuan (S$499 million).

On CapitaLand Commercial C-Reit’s proposed listing, Lee said: “CLI wants to continue to tap into China’s big domestic capital market to further grow its funds management business. Domestic investors are seeking opportunities to deploy their capital due to restrictions that limit the movement of yuan out from China.

“Leveraging CLI’s local teams with strong investment and operating capabilities, it is able to source off-market deals, and work with its capital partners to structure deals to allow them to invest in quality assets that are well managed.”

Amid the current challenging market, the group continues to strengthen its asset management team to drive occupancy and rental growth. 

“Whatever that we do, we want to make sure that we are better than the market,” Lee added. 

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CapitaLand was listed in 2000 through a merger between Pidemco Land and DBS Land. 

Lee said: “It started off as a very Singapore-focused developer at that point in time. There was a big push to go beyond the region. We rode the China wave and built up a nice development business.”

He said that when he took over as president and group CEO of CapitaLand Group in 2018, the board and the management did a review of the business.

“CapitaLand Group’s business model had worked very well and built up a good foundation. However, when we looked at places like China, it was challenging for us to be competitive against the local developers because of (their) ability to secure land, build fast, manage the project at the lowest cost, and sell higher,” he said.

“During the CapitaLand Group days, the development process took a longer time; and being a listed entity, CapitaLand Group had traded at a big discount to book value.”

This was because institutional investors generally do not like the lumpiness of the revenue and profits of development properties, Lee noted.

“So we made a decision… to say that long-term… we should… focus to become an asset management business.” 

In 2021, CapitaLand Group was restructured into real asset manager CLI and CapitaLand Development, the group’s privatised development arm.

Asked if there are plans to grow its management of third-party assets, Lee said the group would do so in a way that makes strategic sense.

“In China, location is important. We do not… want to manage assets in cities where we do not already have a presence because scale is important and synergies are important. We want to make sure that it’s additive to the system so that we can help to strengthen the leasing network and improve the returns for our investors at the end of the day,” he said.

Data centres in India 

Beyond China, another key market for the group is India, especially in data centres and business parks. 

CLI is the most diversified real asset player in India with presence across all the top cities, Lee said. 

The group has built a diversified portfolio comprising more than 40 IT and business parks, industrial, logistics, lodging and data centre assets across eight cities in India – Bengaluru, Chennai, Goa, Gurugram, Hyderabad, Kolkata, Mumbai and Pune. 

Obtaining land with a clean title can be difficult in India but the group’s 30 years of experience in India has enabled it to do so better than its peers, Lee said. 

Lee said: “If you’re a data centre operator without understanding of getting access to land, this becomes challenging… Being able to get land, being able to bring in power and being able to (add) on our data centre expertise – that’s something we want to be able to do in India.”

CLI’s lodging unit, The Ascott, also announced this month it aims to double its portfolio in India to 12,000 units by 2028, up from about 5,500 units at the end of 2024. 

The self-storage sector is an asset class in which CLI sees strong potential, with rising urbanisation and smaller living spaces.

Lee explained: “Self-storage is a stable income-generating business as demand tends to be sticky. For example, customers typically store items such as their wine collections over a long period of time. Also, in countries where there are four seasons, customers will also typically store their winter wear and ski equipment after winter, and their summer wear after summer.”

He noted: “While it takes a bit longer to build up occupancy, depending on the location and how aggressive the marketing team is; but once the cashflows are there, it’s very low maintenance. It’s a great asset class… not just in Asia. We hope to do this in a more global manner.” 

The group, which announced last December it will acquire private credit investment manager Wingate Group Holdings, is looking to build up a broader Asia-Pacific private credit business. 

Many of the banks in Australia and South Korea are reducing their exposure to real estate financing because of regulatory reasons, Lee said. 

The group will assess more opportunities for South Korea and Australia, and some interesting opportunities may come up in Hong Kong and potentially Singapore. 

When asked if there were plans for any new acquisitions in Singapore, Lee said if there are good opportunities allowing CLI to extend its coverage, it will continue to pursue them. 

“We aim to build a company with truly global reach and capabilities. As a home-grown company from Singapore, it’s a great joy to have built a strong international track record and reputation – enabling us to raise capital from sovereign wealth funds, pension funds, family offices and corporates across the world to co-invest with us in opportunities based on the quality returns we have consistently delivered,” said Lee.

“A significant part of this success also stems from the trust that investors place in Singapore and a Singapore-incorporated company.”

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