COMMERCIAL PROPERTY | Staff Reporter, Singapore

Here's why Capitaland's recent divestment is more boon than bane

It recently sold 20 retail malls for $1.71b.

CapitaLand does not have to worry about the loss of 20 retail malls it sold for $1.71b as the loss is only limited to 2.2% of overall net property income (NPI), UOB Kay Hian said.

According to an analysis, the opening of six strong yielding malls and Rock Square acquisition are expected to lift its China malls’ NPI in 2018.

This will offset the loss of income from the 20 malls, with the divestment impact taken in to account.

"Overall, CapitaLand is still on track to meet its ROE target of 8% in 2017 and 2018," said UOB Kay Hian analyst Vikrant Pandey.

Here's more from UOB Kay Hian:

The divestment is in line with CapitaLand’s capital recycling strategy to unlock the value of mature assets for reinvestment into new growth opportunities.

Out of the 20 malls divested, 14 are single malls in single cities, where CapitaLand does not have a big enough presence to enjoy market influence or scale advantages.

At the same time, the divested malls are first-generation malls (purchased more than a decade ago), small-sized (averaging 430,000sqft), and many have long leases locked in with Walmart.

These features have limited CapitaLand’s ability to reposition or rejuvenate the malls via AEI initiatives, amid competition from better-quality malls which are springing up in the vicinity. 

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