Singapore’s Temasek Said Mulling Merger of Mapletree, Capitaland into $150B Fund Manager

Talks of a merger of CapitaLand Investment and Mapletree Investments have heated up in Singapore with CapitaLand issuing a statement on Monday which did not deny discussions which could lead to the formation of a $150 billion real estate fund manager under shared parent Temasek Holdings.

The Wall Street Journal reported late Sunday that the two property investment managers have been negotiating a prospective merger, following a crescendo of market chatter of a potential deal. 

With Mapletree wholly-owned by Temasek, while the government investment firm holds just under 51.8 percent of CapitaLand, the potential for consolidating the state-backed fund managers has been the subject of speculation for years. In a statement to the SGX on Monday addressing media reports of merger talks, CapitaLand seemed to indicate that discussions of a potential deal would not be unreasonable.

“CapitaLand Investment Limited (“CLI”) remains firmly committed to delivering long-term value for its shareholders and in the ordinary course of its business, it regularly explores and evaluates various investment opportunities that align with its strategic objectives,” the company said. It added that, “As a matter of policy, CLI does not comment on rumours or speculation.”

Deal Becoming More Likely

In its statement, CapitaLand said that, should there be developments which require disclosure, it would inform shareholders. Temasek Holdings declined to comment and Mapletree had not replied to inquiries by Mingtiandi by the time of publication. 

While both CapitaLand and Mapletree have built substantial teams managing both private funds and public REITs, the two companies often follow similar themes in their investing and Temasek Holdings has previously merged real estate investment managers within its portfolio, including the $8.3 billion fusion of Ascendas-Singbridge into CapitaLand in 2019.

Analysts have cautioned that no deal is certain, and talks are expected to still be in their early stages, but there are also reasons to expect a merger could move forward.

“While the possibility of such a deal is not new, we believe with CLI’s ambitious S$200 billion AUM target by FY28 and need for a major share price catalyst, there is a likely urgency to possibly get this deal done,” said Vijay Natarajan, real estate and REIT analyst at investment bank RHB Singapore.

Capitaland in March closed on its $214 million purchase of a 40 percent stake in regional fund manager SC Capital Partners, with that acquisition mapped out to give the SGX-listed player the option to gain full ownership of SC within five years. 

“This acquisition is one of the strategic thrusts to scale up our capabilities and build bench strength across our focus markets, accelerating CLI’s growth as a global real asset manager to create greater value for our stakeholders,” CapitaLand CEO Lee Chee Koon said in announcing the SC Capital investment one year ago. 

That acquisition targetted expansion of CapitaLand’s private fund management business, and also boosted its assets under management in Japan. On the public fund side Capitaland controls the managers of six Singapore-listed REITs, in addition to listing a real estate investment trust on the Shanghai exchange in September and taking an interest in the manager of Japan Hotel REIT through the SC Capital investment. 

Challenges in the REIT World

Mapletree, which manages three Singapore-listed REITs and nine private real estate funds may have its own motivations for a merger as higher interest rates have presented challenges for most managers of Singapore-listed trusts in recent years, despite a recent upturn.

With a playbook built around assembling portfolios of assets in markets around the world for potential listing in REITs or sales to other investors, Mapletree in September sold a Melbourne office building at a more than one-third markdown from its 2017 acquisition price. 

“Mapletree on the other hand has been facing challenges from its overseas markets portfolio and thus in our view may be more open for such a merger possibility,” RHB Group’s Natarajan said.

CapitaLand’s 2019 merger with Ascendas-Singbridge upgraded the company from Southeast Asia’s largest real estate company into the largest in Asia. Ascendas-Singbridge had been formed by the 2015 combination of business park specialist Ascendas with urban development firm Singbridge, with both firms having been controlled by Temasek Holdings.

Following CapitaLand’s merger with Ascendas-Singbridge, CapitaLand’s Ascott Reit and Ascendas-Singbridge’s A-HTRUST were merged into what is now known as CapitaLand Ascott Trust.

Should the potential merger of Mapletree and CapitaLand be realised, it would be among the largest M&A transactions ever in Singapore, RHB Group noted.

Note: This article has been updated to clarify that CapitaLand Investment has purchased a 40 percent stake in SC Capital Partners. An earlier version referred to a controlling stake. It has also been updated to clarify that Ascott Reit and A-HTRUST were merged into CapitaLand Ascott Trust. Mingtiandi regrets any misunderstanding.