Here's how CMA's seed assets for its first PE fund will impact its finances
CMA will get a net gain of S$71.8m from the divestment of a partial stake as well as fair value gain from its retained share, says DBS.
According to DBS, CMA has established a new private equity fund CapitaMalls China Development Fund III (CMCDF III) with a fund size of US$1b.
Here's more from DBS:
CMA will take a 50% share in the fund with the remaining held by institutional investors from Asia and North America. CMCDF III will invest in the development of shopping malls in China and has a fund life of eight years. CMCDF III is CMA's largest private equity fund established to date and will strengthen the group's fee income model. Once fully deployed, it will increase CMA’s total AUM (100% basis) to cS$21b.
Realises divestment gains, lowers gearing for CMA. The fund will be seeded with three assets valued at S$749.4m from CMA, namely CapitaMall Tianfu, CapitaMall Meilicheng, both in Chengdu, and its entire 66% share in an integrated retail/office development in Luwan, Shanghai. Post divestment, CMA will have an effective 75% stake in Meilicheng and Tianfu and a 33% share of Luwan. Currently under various stages of construction, these properties have a relatively short gestation period and are expected to be operational between 2013 and 2015.
In terms of impact, CMA will recognise a net gain of S$71.8m from the divestment of a partial stake as well as fair value gain from its retained share. This is likely to be reflected in FY12 results. In addition, the group would also be able to generate fee income from managing the fund, in the medium term. With the divestment, its debt-to-asset ratio is expected to decline marginally, by c.3%pt to mid 30+%. This leaves more headroom for further capital recycling into new investments.