CapitaLand Investment Sees Profit Drop 19% in H1 as Deals Dwindle

CapitaLand Investment Ltd’s profit after tax and minority interests plunged 19 percent to S$351 million ($260 million) in the first half of the year from S$433 million a year ago as a slow market for asset trades translated into smaller gains.

The fund management arm of property giant CapitaLand Group saw its revenue edge down by 1 percent year on year to S$1.35 billion in the first six months, as a dearth of asset disposals and smaller valuations gains more than offset a 9 percent increase in fee-related earnings fueled by its lodging business.

“Despite a challenging environment, we have continued to press ahead and execute well on our priorities, keeping our long-term goals in mind and making sure we do right by our investors across the various vehicles,” said Lee Chee Koon, group chief executive officer at CLI. “Looking ahead, we expect the pace of capital recycling to improve.”

The SGX-listed firm flexed its fundraising muscle despite the gloomy business environment by raising S$3.2 billion in committed equity through 10 August to surpass the funds raised in all of 2022 by 28 percent.

Travel Rebound

CLI attributed the decline in post-tax profit to lower portfolio gains, with the firm racking up just  S$7 million in divestment gains in the first six months of the year, compared to S$87 million booked a year ago thanks to its sale of a partial stake in what is now known as the CapitaSky office tower.

The firm’s largest deal during this most recent period was its sale of its entire stake in the Queensbay Mall in Penang, Malaysia in March for RM 990.5 million (then $216 million), which translated to a S$13 million net gain.

Dragging profits down further was the absence of performance fees, after the company had exited from two private funds last year, as well as a 21 percent surge in finance costs which climbed to S$239 million from S$197 million.

Mitigating the slump was higher fee and rental income from its lodging management business, where it took in a total of S$671 million from January through June, which was up 4.2 percent from a year earlier on an uptick in travel.

By business segment, CLI’s revenues from investment properties declined 3.6 percent year on year to S$932 million, due to lower revenues from its assets in China and the lack of property divestments.

The company’s fee-driven business, posted a 9 percent growth in revenues to S$519 million in the first half, driven by recurring fund management fees and an upswing in other fee-related earnings.

Capital Raising Gather Steam

Despite a quiet dealmaking environment, the S$89-billion fund manager continued to attract global investors looking to deploy cash in Asia Pacific real estate during the first half of the year.

As of 10 August, the firm had expanded the CapitaLand China Opportunistic Partners Programme (CCOP Programme) which it launched in February with S$870 million in fresh third-party capital commitments to bring the strategy’s total committed equity to S$2.1 billion.

CLI said it is selling an additional stake in a build-to-suit logistics development in the city of Foshan, in China’s Guangdong province to the CCOP Programme. The transaction will increase the vehicle’s ownership in the 140,355 square metre (1.5 million square foot) warehouse, which is set to be completed this quarter.

CLI also revealed S$134 million in new commitments to its CapitaLand Open End Real Estate Fund regional flagship vehicle, which has been investing in Japan, Singapore and Australia since its inception in 2021.

Earlier this week, the fund manager unveiled its second India business park development strategy dubbed CapitaLand India Growth Fund 2, which hit S$368 million in its first closing.

“With the strong investor demand for (the three strategies), we will continue to grow such scalable fund products and plan to embark on funds focused on value-add opportunities in Asia Pacific,” said Simon Treacy, CLI’s CEO for private equity real estate.

“We will continue to build up country-specific domestic funds and capital sources in China and India. We will also pursue opportunities to grow our private funds across new economy and alternative asset classes,” Treacy added.

In February, the fund set up a China-focused data centre development fund with S$530 million in committed capital that will be invested in two Greater Beijing hyperscale projects.