CapitaLand Investment Reports Steady Q1 Results on Lodging Rebound, China Funds

CapitaLand Investment Ltd reported encouraging results from its China fund management business and a 38 percent jump in revenue from its hospitality management division in the first quarter, despite a near shut down in trades of assets in most markets around the region.

The SGX-listed asset management arm of CapitaLand booked S$76 million ($57 million) in fee-related earnings from lodging management last quarter, up from S$55 million a year ago, which made it the best performing segment for the fund manager, according to its latest financial results on Thursday.

“Overall, we view this as a pretty steady quarter for us. We really had strong growth from our lodging business that has really performed well which has benefited from improvement in the travel and hospitality sector,” Paul Tham, CLI’s group chief financial officer, told Mingtiandi in an interview that same day.

Despite the rise in lodging income, CLI’s overall revenues from its fee income-related business fell by 3 percent last quarter compared to the same period in 2022 as property transactions ground to a halt. Rising interest rates and market uncertainties caused commercial property deals to plunge to their lowest level in over a decade during the first quarter, data from MSCI Real Assets showed.

“Our expectation is that when interest rates stabilise, hopefully by the second half of this year, we will start to see that transaction volume will pick up as well,” Tham said.

Dealmaking Disappoints

Revenues from CapitaLand’s fee income-driven businesses – which include lodging management by its wholly-owned The Ascott Ltd subsidiary, together with funds management for both its listed and private vehicles – dropped to S$255 million in the first quarter from S$262 million a year earlier, as real estate investment transactions dried up globally.

CLI’s total funds under management (FUM) rose by 1 percent to S$89 billion at the end of March, keeping CLI on track to reach its target FUM of S$100 billion by 2024. In addition to its private fund management business, the company controls the managers of some of Singapore’s largest list REITs, including CapitaLand Integrated Commercial Trust and CapitaLand Ascendas REIT.

The company’s income dip was mitigated by stronger turnover for The Ascott after the lodging business booked S$81 million in revenue per available unit (RevPAU) last quarter, which was up 42 percent from S$57 million thanks to both higher occupancy and better average daily rates.

“Lodging will continue to be a key contributor to growth, of all the sectors they certainly have a lot of tailwinds behind them,” Tham said. “We also hope to see the China recovery in the second half help improve the growth of our fund business across multiple asset classes in China.”

The asset manager also recorded higher rental income from its investment properties. Revenues generated by its S$35-billion portfolio rose 11 percent to S$447 million in the first quarter from S$403 million a year earlier on strong performance in its three core markets in the region – Singapore, India and China.

In its fund management business, CLI’s fee income dropped by 23 percent year on year to S$102 million last quarter due to the absence of event-driven performance fees. As of 10 May the company had achieved total investments and divestments so far this year of just S$1.5 billion, or less than half of the S$3.5 billion it booked in the same period last year.

“The dip in the fee business was due to lower performance and acquisition fees this quarter, and we hope to make that up in the second half,” Tham said.

“The market environment is still a little bit uncertain globally and with rising interest rates, the real estate sector is still adjusting to this environment. We think it will take a little bit more time for transaction volume to pick up,” he added.

Self Storage, Data Centre Fundraising

While fundraising has slowed for most of the world’s largest players during 2023, CapitaLand Investment has found traction in mainland China – an arena where many of its counterparts in North America and Europe fear to tread.

CLI raised S$1.7 billion in fresh capital via two China-focused funds it launched in February – a S$1.1-billion opportunistic strategy targeting special situation opportunities as well as raising S$530 million in committed equity for its first-ever mainland data centre fund.

The opportunistic fund acquired Beijing Suning Life Plaza, a commercial tower in the capital’s CBD, for S$553 million, with plans to redevelop the property.

While planning to further expand its China strategies, Tham said CLI is also looking to ramp up fundraising efforts in Southeast Asia and other parts of Asia across asset classes, including self storage and data centres.

In October last year CLI teamed up with Dutch pension fund manager APG to invest up to S$1.14 billion ($810 million) to take over and further develop self-storage operator Extra Space Asia.