CapitaLand Investment to Recycle Up to S$9B in Non-Core Assets, Trim REIT Stakes

CLI is earmarking up to S$9 billion of non-core and legacy assets for capital recycling as it focuses on growing its listed and private funds businesses and lightening its balance sheet. Group CEO Lee Chee Koon said at an earnings briefing on Aug 13 that the group still has a “fairly large balance sheet” of legacy assets, including joint venture funds and development funds created when CapitaLand was still a developer.

Group chief financial officer Paul Tham said the majority of the S$7 billion to S$9 billion targeted for recycling comprises balance-sheet and legacy fund investments, the bulk of which is from China. It also includes some assets in Singapore, India and Europe. About 30% to 40% would come from its sub-scale private funds and the remainder from excess holdings in its REITs and platforms.

CLI will also focus on reducing its stakes in its larger REITs to a target sponsor stake of about 15%. The group currently holds a 20% stake in CICT and 16% in CLAR. Reducing stakes to an average of 15% across some S$8 billion of REIT units could improve the REITs’ free float and daily trading volumes, while freeing up “a couple of billion dollars” in capital, said Tham.

CLI posted a net profit of S$327 million for the first half ended June, up 14% from S$287 million a year earlier. This was driven by higher fee income from its listed and private funds management platforms. Revenue fell 2% to about S$1.02 billion, mainly due to the absence of contributions from divested assets and deconsolidation, partially offset by higher fees.

Listed funds recorded a 45% year-on-year increase in fee revenue to S$224 million from about S$10.6 billion of transactions, while private funds fee revenue jumped 59% to S$92 million, driven by the acquisition of real estate private credit platform Wingate last year. Operating Ebitda from the fee-related business rose 30% in H1.

Ascott’s fee-related business grew 4% year on year, led by higher performance of existing properties and contributions from new assets. Lee said the hospitality arm’s steady performance has attracted interest from investors and limited partners, adding that CLI is “totally open-minded” about bringing in investors that can help further its M&A ambitions.

CLI will retain listed and private funds as its core business, supported by key operating capabilities in commercial and lodging management. The group will prioritise its commercial, living, self-storage and credit strategies, while rationalising smaller, sub-scale funds that it does not see the potential to scale meaningfully.

Freed up capital would “likely go into reinvestment for growth”, Tham said, with opportunities in living and credit. “We’d also like to pay down some debt. But I’d imagine at least a third could go towards returning capital to shareholders.”

CLI’s lodging business has room to expand, with 40% of its portfolio in the pipeline and expected to become operational over the next three years. Private credit will also be a priority for potential mergers and acquisitions, with CLI’s second credit fund oversubscribed and the group working on its third.

Citi analyst Brandon Lee expects the legacy funds targeted for recycling to be largely China retail and mixed-use assets, while the non-strategic REIT holdings likely include CapitaLand and Ascott Trust (25% stake), CapitaLand China Trust (25%), CapitaLand India Trust (23%) and CapitaLand Malaysia Trust (37%). Shares of CLI ended Thursday 0.7% higher at S$2.75.