Rock Square to solidify CapitaLand Retail China Trust's growth

CRCT finished the acquisition of 51% of the firm holding the property.

CapitaLand Retail China Trust's (CRCT) special purpose vehicle has acquired 51% of the target company holding Rock Square, Guangzhou, China.

OCBC Investment Research said the management expects Rock Square to be a significant driver of DPU growth.

DBS Equity Research said, "Although the initial yield is lower in comparison, we believe the asset has greater growth potential and is also an indication of CRCT embarking on a growth path."

The broker said investors should note that 52% of Rock Square’s total rent or 32% of its Net Leasable Area (NLA) is up for renewal from 2018 to 2020.

CRCT believes that average passing rents are currently below market.

DBS noted that CRCT’s gearing is around 34% after the Rock Square acquisition. This translates into a debt headroom of over $550m, which provides flexibility for further acquisitions.

The broker projects another $250m acquisition in 2018.

"We believe management’s move to divest Anzhen and acquire Rock Square signals its shift in focus from stability from master leases to growth generated from more actively managed assets. More of such acquisitions would confirm such a move," DBS analyst Derek Tan said.