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CapitaLand Retail China Trust’s (CRCT) $230 million sale of CapitaMall Anzhen in Beijing earlier this year is expected to provide it with more debt headroom to acquire more properties in the future, reported the Singapore Business Review.
“We believe the divestment signals a shift in the manager’s focus from stability to growth generated from more actively managed assets. The acquisition of Rock Square is a confirmation of such a move, and more acquisitions could be on the radar,” said analyst Derek Tan of DBS Equity Research.
Following the disposal, CRCT and CapitaLand acquired Rock Square mall in Guangzhou for $688.9 million last month on a 51:49 joint venture, respectively.
He noted that while Rock Square has a lower initial yield of four percent compared to CapitaMall Anzhen’s six percent, the former has better prospects.
“We believe Rock Square has much greater growth potential because it is a newer property that started operations only in 2013 versus 2005 for Anzhen, and it is a multi-tenanted property with around 60 percent of leases due in the next three years. This gives rental upside potential as well as flexibility to alter tenant mix to optimise efficiency.”
Moreover, CRCT’s leverage reached 38 percent after the Rock Square acquisition and this could further fall to 34 percent if net proceeds from the sale of CapitaMall Anzhen is utilised to repay borrowings.
“We believe CRCT received circa $180 million in cash proceeds from the divestment of Anzhen. While this sum was not used to pare down debt, only $100 million will be utilised from its cash balance to fund the acquisition.”
“This leaves a total debt headroom of over $550 million post the acquisition, which provides ample financial flexibility for further acquisitions in the near term,” said Tan, who is expecting the trust to acquire additional properties worth $250 million in early-2018.
This article was edited by Keshia Faculin.
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