In what is in many ways an internal asset transfer, CapitaLand owned Ascott Holdings announced on May 5th that it is selling the New Minzhong Leyuan Mall in Wuhan to CapitaRetail China Trust (CRCT) for RMB 395 million. Both companies are subsidiaries of Singaporean real estate developer CapitaLand which is closely linked to the Singapore government.
The mall is located in Wuhan’s shopping and entertainment belt and has a net property income (NPI) yield of 8.1 per cent compared to the NPI of 7 per cent for CRCT’s entire portfolio. CRCT’s entire portfolio is valued at S$1.2 billion. CRCT said it expects the transaction to be yield-accretive to its unitholders.
New Minzhong Leyuan Mall is almost 15 years-old and it comprises an annexed building and a conserved building.
The project has has a total of 393 leases and a committed occupancy of 90.6 per cent over its net lettable area of 23,361 square metres. Major tenants include McDonald’s, KFC, Pizza Hut & cinema operators Studio City, with most other tenants selling fashion items and accessories.
CRCT says independent valuations from CB Richard Ellis and Knight Frank for New Minzhong Leyuan Mall amount to RMB 417 million (S$79 million) and RMB 422 million (S$80 million) respectively.
Retail spending from the mall is expected to reach RMB 35.9 billion (S$6.8 billion) by 2015, 1.5 times compared to RMB 14.4 billion (S$2.74 billion) in 2009.
As 64.2 per cent and 24.8 per cent of the mall’s leases expire in 2011 and 2012 respectively, CRCT said this will mean potential rental increases through rental renewal.
The manager also sees asset enhancement opportunities to lift rental revenues further.
CRCT is confident of Wuhan’s growing consumer spending as an up-and-coming second-tier city in central China.