CapitaMalls Asia converts China development fund to an income fund

Conversion, which enabled the company to upsize fund by 50% to US$900mn, reflects evolution from assets under development into operational malls.

CapitaMalls Asia Limited announced on Tuesday that it is converting its CapitaRetail China Development Fund (CRCDF) to an income fund. With this conversion, the investors can expect to receive distribution income from the fund’s portfolio of 24 malls that are operational by the end of this year. The fund is also being upsized by 50% to US$900.0 million.

CRCDF was due to expire in June 2012, before this conversion. With the conversion, the fund will be renamed CapitaMalls China Income Fund (CMCIF), and will mature in 2017. The conversion from a development fund to an income fund reflects the evolution of the malls from assets under development into operational ones.

CMCIF’s portfolio will include Hongkou Plaza in Shanghai, which was originally held under CapitaRetail China Development Fund II and is scheduled to open later this year. In addition, CMCIF will also consist of CapitaMall Jinniu in Chengdu and CapitaMall Fucheng in Mianyang, of which the construction of Phase II of the two malls have commenced. Hence, besides enjoying the stable income and the organic growth of the operational malls through lease renewals, the portfolio in CMCIF will also provide further upside when Hongkou Plaza is fully opened by year-end and the Phase II developments of CapitaMall Jinniu and CapitaMall Fucheng are completed in 2013.

CapitaMalls Asia will commit another US$135 million to the fund, corresponding to its 45% stake in CMCIF. Besides CapitaMalls Asia, other investors include a European pension fund, an insurance company and an established institutional investor.

CapitaRetail China Trust will continue to be given a right of first refusal over any shopping malls that may be divested from the CMCIF portfolio, as well as any potential acquisition of a shopping mall by CMCIF.

Mr Lim Beng Chee, CEO of CapitaMalls Asia, said, “China is a large market and to grow CapitaMalls Asia’s business in China, we will continue to work with capital partners. We decided to convert the fund after investors indicated their preference to continue co-investing with us in China. This reflects the continued confidence our investors have in us and our competencies in mall management. We are encouraged by their response to the new upsized CapitaMalls China Income Fund.”

“CapitaMalls China Income Fund’s total asset value of nearly US$2.0 billion is one of the largest portfolios of 24 diversified income-producing shopping malls in 24 different cities in China. The fund is expected to provide stable distributions to its investors, effectively making it a private REIT-like vehicle. This caters to investors who prefer to invest in real estate through a private fund structure instead of publicly-listed REITs.”

CRCDF was launched in 2006 to invest primarily in retail mall developments in various parts of China. The original committed capital of US$600.0 million has been fully drawn down and invested.