CapitaLand's development pipeline doubles to 13.9 million sqm over Chinese, Indian assets

Its China development pipeline alone has grown 25% to 7.1 million sqm GFA.

CapitaLand’s development pipeline has doubled to 13.9 million sqm, of which 44% is currently under development, largely thanks to its expanding portfolio in China and India, CGS-CIMB said in a report. Of this total gross floor area (GFA), India has emerged visibly, accounting for 35% of developable GFA whilst industrial/business parks/logistics segment now make up c.45% of development GFA.

CGS-CIMB analyst Lock Mun Yee noted that CapitaLand’s China development pipeline has grown 25% to 7.1 million sqm GFA. Some of the key projects are the 50% stake in the China-Singapore Guangzhou Knowledge City (CSGKC) as well as gaining 100% ownership of the Raffles City Chongqing development.

Lock noted that the Phase 1 of CSGKC consists of 6.27 sqkm and includes the OneHub developed by ASB. OneHub Phase 1 has been completed and OneHub Phase 2 (business parks and residential) has commenced. Phase 1 of CSGKC has a remaining developable GFA of 434,000 sqm. The group has also signed a memorandum of understanding (MOU) for Phase 2 of CSGKC. Other landbank within the CSGKC includes a 40% stake in the Tianjiao residential project.

The other key expansion for CapitaLand is into the industrial/business parks/logistics sector in Singapore, China, India as well as UK and Australia. This segment forms 28% of development pipeline and 13% of the group’s assets under management (AUM).

Notably, the company’s India exposure now makes up 35% of geographic GFA. There is a developable GFA pipeline of around 5 million sqm.

Lock commented, “Historically, the group had been able to achieve yields of mid to high teens on cost from its development activities. India has been growing its AUM by c.10% CAGR since March 2017. Furthermore, India is a full value chain platform with development and fund management capabilities backed by deep local expertise. The group has a strong and proven track record of over 25 years in India. They are one of the first movers in the India IT parks space and have recently moved into the under-penetrated logistics sector through a joint venture with Firstspace.”

Meanwhile, the listed Ascendas India Trust (AiT) could benefit from a strong growth momentum over time, with monetisation opportunities within the group as well as from third parties. Apart from the two private equity funds in India – Ascendas India Growth Programme (AIGP) and Ascendas India Logistics Programme (AILP), CapitaLand has developments in International Tech Park Gurgaon (ITPG) SEZ1 and SEZ2 and ITP Chennai Radial Rd. There is also remaining developmental GFA of 18,616 sqm in ITP Pune.

AILP’s investment objective is to deliver logistics and industrial real estate facilities across major warehousing and manufacturing hubs in Mumbai, National Capital Region, Pune, Chennai, Bangalore and Ahmedabad. It targets to develop a portfolio of 13-15 million sqft of space.

Lock noted that Temasek and ASB have committed nearly $400m of capital to this fund. Two seed assets have been identified offering 1.25m sqft of operational GFA and 4 million sqft of development GFA pipeline.

CapitaLand’s AUM has ballooned to $123b, ranking it amongst the top 15 global real estate investment managers by real estate AUM. Of this, $73b are via the listed REITs and $50b are either on balance sheet or within its private funds.

“With its broader asset class reach and wider geographical coverage, we think the group could further attract new capital partners and potentially establish new platforms in the longer run to drive its capital recycling strategy,” Lock commented.