CapitalMalls goes from build to rent phase with fund name and size change

CMA has announced that it is converting its CapitaRetail China Development Fund (CRCDF) to an income fund, CapitaMalls China Income Fund (CMCIF). CRCDF was due to expire in June 2012 and with this conversion, CMCIF will mature in 2017. At the same time, the fund is being upsized
by 50% to US$900m with the inclusion of 3 malls - Hongkou Plaza in Shanghai (to be opened later this year) and Phase 2 of Jinniu Mall and Fucheng Mall in 2013. CMCIF's total asset value of US$2b is one of the largest in China. CMA will commit US$135m to the enlarged CMCIF, maintaining its 45% stake in the fund.

We see this deal as earnings neutral with a marginal <1% annualised boost coming largely from the upsized fund size, but positive from a cashflow and fee income perspective. With the conversion into CMCIF, the group can expect to receive stable distribution income in a more consistent manner as the income fund has to payout its income as dividends. With the increase in fund size, CMA would also
be able to grow its fee income base. Under CMCIF, fee income will be based on NAV and NPI on top of equity drawn while the development fund fee structure is based on equity drawn. CMA's RNAV would be lifted by <1%.

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