CapitaLand Investment 1H Profit Dips 6%, Sells Suzhou Asset to RMB Fund

CapitaLand Investment (CLI)’s net profit declined 6 percent year-on-year to S$331 million in the first half of the year, as portfolio gains helped cushion a 14 percent slide in operating profit after tax and minority interest (PATMI).

SGX-listed CLI’s revenue edged up 1 percent year-on-year to S$1.4 billion, with turnover from its fee income-driven business climbing 8 percent, led by growth in the commercial, lodging, and private funds management segments. The higher fee income helped offset a 2 percent dip in its real estate investment revenue, which the company attributed to higher interest expenses, foreign exchange losses, and reduced income following the divestment of assets.

“We will continue to scale up organic growth in funds, lodging and commercial management and seek out strategic and complementary mergers and acquisitions to grow our funds under management,” CLI chairman Miguel Ko said in a release on Wednesday. “We will remain prudent and focused on achieving quality fee-related earnings as we expand our capacity for sustainable asset-light growth and create value for all our stakeholders.”

The Temasek Holdings-controlled giant also announced on Tuesday a first close for its sixth onshore renminbi fund – China Business Park RMB Fund III – with an initial equity commitment of RMB 1.2 billion ($168 million). Backed by an unnamed onshore institution, the vehicle will purchase a Suzhou business park from CLI, with market sources pointing to insurer AIA as the investor.

Fee Income Contribution Jumps

CLI recorded total PATMI of S$331 million and operating PATMI of S$296 million for the first six months of the year. Fee income accounted for 63 percent of the company’s operating PATMI, which excludes gains and losses from divestments, revaluations, and impairments, after contributing 49 percent in the same period last year.

EBITDA for the period increased 8 percent year-on-year to S$819 million, boosted by a S$69 million portfolio EBITDA gain from capital recycling activities. Including deals in progress, CLI,  together with public and private vehicles under its management, has logged S$1.7 billion in gross divestments so far this year, the company said.

“Capital recycling remains a key priority in 2024 as we continue to reconstitute our portfolio and improve return on equity for our investors,” said CLI group CEO Lee Chee Koon. “We will sustain the ongoing momentum of divesting assets in China and the USA, and continue to focus on building new capabilities in markets beyond Singapore and China.”

CLI’s real estate investment business, which posted revenue of S$911 million and PATMI of S$104 million for the period, grew its net property income and achieved positive rental reversions in all markets except China, where it suffered a a 5.6 percent year-on-year decline in NPI in Singapore dollar terms amid negative rental reversions across retail, office, and new economy properties.

The company’s fee income-generating divisions booked revenue and PATMI of S$561 million and S$175 million respectively, boosted by a 22 percent year-on-year jump in commercial management income and a 12 percent increase from management of private funds. Lodging management income grew 4 percent, driven by a 14 percent revPAU increase in Japan and Korea.

Lee said CLI plans to expand its management of funds investing in data centres, wellness and private credit, as well as ramping up capital raising and deployment in the lodging, logistics and self-storage sectors. The company sees opportunities in Southeast Asia and India, and plans to expand its product offerings in those markets as well as in Australia, Japan, and South Korea.

Suzhou Asset Sale

In its latest transaction CLI is selling Ascendas iHub, a business park in the eastern Chinese city of Suzhou, to China Business Park RMB Fund III (CBPF III) for RMB 1.4 billion. CLI will maintain a sponsor stake in the close-ended vehicle, which is expected to add RMB 2 billion to the company’s funds under management when fully deployed.

Located in the Dushu Lake Science and Education Innovation District within Suzhou Industrial Park, Ascendas iHub Suzhou comprises four mid-rise and 11 low-rise buildings with a total gross floor area of approximately 170,800 square metres (1.8 million square feet). Following the divestment, CLI will continue to manage the LEED Gold-certified property, which counts international and domestic biomedical and IT enterprises among its tenants.

“CBPF III builds on our track record of attracting and cultivating long-term partnerships with domestic investors,” said Kara Wang, chief investment officer of CLI China. “The recapitalisation of Ascendas iHub Suzhou demonstrates the disciplined execution of our strategy to recycle quality assets from our balance sheet into our RMB funds as part of our China for China capital management strategy…with the government’s continued focus on technology and industrial transformation, we see prime business park opportunities for CBPF III, both from CLI’s portfolio as well as third-party assets.”

CBPF III is a follow-on to CLI’s China Business Park Core RMB Funds I and II, which were launched in 2022 with a total fund size of about RMB 4 billion. Fund I was seeded with the Ascendas i-Link office property in Shanghai’s Zhangjiang High Tech Park from CLI’s balance sheet, while Fund II in 2023 acquired phase one of The Springs Center office project in Shanghai from Tishman Speyer.

Since the establishment of its first onshore RMB fund in 2022, CLI has secured 11 new domestic capital partners and raised nearly RMB 50 billion of onshore capital.

As of 31 March, CLI managed S$25 billion of funds across 14 private investment vehicles in China. The company has divested S$1.5 billion worth of mainland Chinese assets since its listing, of which over 70 percent have been transferred to RMB funds under its management.

The divestment of Ascendas iHub Suzhou marks CLI’s second disposal of a mainland China asset this year following the sale of a 95 percent stake in the Capital Square office building in Beijing to a joint venture with AIA. The Hong Kong-listed insurer had yet to reply to inquiries from Mingtiandi regarding its reported involvement in China Business Park RMB Fund III by the time of publication.

“Our fund and asset management expertise, coupled with strong on-the-ground execution capabilities, positions CLI competitively to deepen our existing partnership with the anchor investor to mutually benefit from the highly scalable business park sector,” said Puah Tze Shyang, chief executive of CLI China. “Our focus in China remains to optimise our portfolio and expand domestic capital partnerships.”