CapitaMalls acquires 3rd shopping mall in China

Here's why CMA is willing to pay as much as S$3,229  per sq m of GFA for this.

In a release, CapitaMalls Asia said that it has signed an agreement to acquire the retail component of an integrated development which also includes residential and office components, situated along Zhong Bei Road in Wuchang District. It is acquiring the shopping mall from a subsidiary of China Railway.

Here's why it's a hot investment according to CMA:

1. Construction Corporation is one of the largest construction companies in China listed in Shanghai and Hong Kong and a state-owned enterprise.

2.  Wuchang District is the most populated district in Wuhan with a population of over 1 million. The mall’s catchment within a 5 kilometre (“km”) radius includes about 700,000 residents, the Hubei provincial government headquarters, other government complexes and Wuhan University and Huazhong University of Science and Technology – the top two universities in Hubei Province in terms of academic excellence.

3. The mall will enjoy good connectivity with a direct link from the basement to Zhou Jia Da Wan ( ) station on Metro Line 4, which will be operational in 2013. Metro Line 4 is a key transportation line linking Wuchang and Hanyang, two of the three main areas (HanyangHankou and Wuchang ) in Wuhan.

4. As the capital city of Hubei Province, Wuhan has a fast-growing economy and central location which attracts strong international trade and foreign direct investment. More than 170 multinational corporations such as Citroen, Foxconn, Hewlett-Packard, Honda, Nissan, Philips and Siemens have established operations in Wuhan. In addition, Wuhan has several well- known local companies such as Dongfeng Motor, FiberHome Technologies Group and Wuhan Iron and Steel.

The proposed mall plan

Subject to planning approval, CMA said that the eight-storey shopping mall (from Basement 1 to Level 7) will have a total gross floor area (“GFA”), excluding car park, of about 70,700 square metres (“sq m”).

Positioned as a middle- to upper-middle income, one-stop shopping destination, the proposed mall will house popular international and local fashion brands, a supermarket, children-related specialties, entertainment facilities and good quality restaurants offering local and international cuisine.

When completed in 2014, it will cater to the needs of the working professionals, government officials and residents working and living in the vicinity. The mall will have about 900 car park spaces.

According to CMA, On a completed basis, the total investment cost of the shopping mall is expected to be about RMB1,156.0 million (S$228.3 million / HK$1,413.5 million), or about RMB16,354 (S$3,229 / HK$19,996) per sq m of GFA.

Mr Lim Beng Chee, CEO of CapitaMalls Asia, said: “Wuhan is a major transport and commercial hub in central China. It is a high growth city with strong economic fundamentals. Wuhan’s GDPgrowth averaged 14.0% per annum over the last five years, above the average 10.0% perannum for Beijing and Shanghai. In addition, its per capita urban disposable income rose 14.1% while retail sales grew 18.0% in 2011 – slightly higher than the national growth of 17.1%. This gives us confidence in the potential of the retail market in Wuhan.”

“With this acquisition, we now have three shopping malls in Wuhan. Our other two malls, CapitaMall Minzhongleyuan, which is operational, and CapitaMall Wusheng, which will be opened later this year, are both located in the Hankou area in Wuhan. Being in Wuchang area, this new mall will thus extend our presence in Wuhan. Leveraging on our mall management expertise and leading network of retailers in the region, we are confident that the mall will be a key retail destination in Wuchang.”

Including this development, CapitaMalls Asia now has 59 shopping malls in 36 cities in China, of which 43 are operational while the other 16 are under development.