CapitaLand Investment to list first REIT in China

Abundant liquidity and a large pool of retail investors will drive the demand.

CapitaLand Investment Ltd. (CLI) plans to list its first real estate investment trust (REIT) in China, where risk sentiment has started to recover amid a buying frenzy for companies that own income-generating properties

“China is a compelling market for the launch of CapitaLand Commercial C-REIT due to its abundant liquidity and growing pool of domestic institutional investors seeking stable, income-generating investment opportunities amid capital movement restrictions,” Puah Tze Shyang, CapitaLand Investment (China) CEO, told Singapore Business Review.

Retail China REITs (C-REIT) have generated an average total return of about 52% since listing, with yields at around 3.8%, reflecting strong investor demand, he said in an emailed reply to questions.

The global real asset management company seeks to list CapitaLand Commercial C-REIT (CLCR) on the Shanghai Stock Exchange (SSE) by the last quarter. It could become the first foreign-sponsored retail C-REIT and the first by a Singapore-based company.

China’s $34b (RMB190b) REIT market had 65 listed REITs as of 9 May, with eight focused on retail.

CLCR will be CLI’s eighth listed fund if approved, reinforcing CLI’s position as Asia Pacific’s largest REIT manager by market capitalisation. 

CLI holds stakes in seven listed funds which have a total market capitalisation of about $37b. Five of its funds are listed in Singapore and one in Malaysia. CLI also recently entered the Japan REIT market through the strategic investment in SC Capital Partners Group. 

“The proposed listing supports our broader strategy to pursue asset-light growth and capital recycling,” Puah said. “It aligns with our strategic goal to expand our footprint in China by tapping into perpetual domestic capital.”

Puah said CLCR would support CLI in widening its investor base, complementing its Singapore-listed CapitaLand China Trust (CLCT). 

CLCT targets Greater China, attracts global investors, and holds a mix of assets, whilst CLCR focuses on retail properties in the mainland and caters to local investors, he said. China is home to about 200 million retail investors. 

C-REITs were only allowed to hold retail assets in 2023 and were limited to infrastructure and housing assets.

CLCR, which will focus on the mainland’s developed urban areas, will hold two assets—CapitaMall SKY+ in Guangzhou and CapitaMall Yuhuating in Changsha, Puah said.

CapitaMall SKY+ is co-owned by CLI and CapitaLand Development, while CapitaMall Yuhuating belongs to CLCT. All three are strategic investors in CLCR.

“CLCR’s focus on mature, income-producing retail assets allows us to benefit from favourable policy directions, capture opportunities in a growing market and deliver sustainable returns to our unit holders,” he said.

Puah said with the Chinese government’s push to continuously finetune policies in stimulating domestic growth and drive economic growth, there is room for long-term growth of the C-REIT market.

He noted that the C-REIT market is still evolving, and it might take time for retail investors to mature.

“We will continue to actively engage with investors and regulators to deepen their knowledge of CLI’s fund management expertise and build confidence in the long-term value proposition of CLCR,” he said.

CLI also aims to set up listed vehicles in Australia and India at an opportune time.