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  • Real Estate Team

CapitaLand Mall Trust Acquires CapitaLand Commercial Trust to Form the Second Largest REIT in Asia

By: Lisanne Vellinga and Jasmine Khoo

Overview of the deal

On 3 November 2020, CapitaLand Mall Trust Limited (CMT) closed the deal to acquire CapitaLand Commercial Trust Limited (CCT), forming a new juggernaut in Singapore’s Retail and Office REIT (Real Estate Investment Trust) space. This transaction is described as a merger of equals and came hot on the heels of 3 Singapore REIT mergers in 2019. The combined entity, CapitaLand Integrated Commercial Trust (CICT), will be the second largest REIT in Asia, ranking just below Hong Kong’s Link REIT.

Company Details: CapitaLand Mall Trust (CMT)

CMT is the largest retail REIT in Singapore. It owns 14.6% of the country’s malls with over 100,000 square feet of net lettable area (NLA), with a good balance between downtown and suburban malls which are in close proximity to transport networks.

Founding date: 2001

Headquarters: Singapore

CEO: Tan Tee Hieong

Number of employees: 12,100

Market Capitalisation: USD7.1 billion (as of announcement date)

EV: USD7,938.4 million

LTM Revenue: USD572.5 million

LTM EBITDA: USD327.36 million

LTM EV/Revenue: 13.8x


Company Details: CapitaLand Commercial Trust (CCT)

CCT is a Singapore Office REIT which owns the biggest portfolio of Grade A assets in the country’s Central Business District (CBD). It has a diverse tenant mix and a well-spread lease expiry profile.

Founding date: 2004

Headquarters: Singapore

CEO: Chee Tien Jin

Number of employees: 124

Market Capitalisation: USD8.2 billion (as of announcement date)

EV: USD6,574.8 million

LTM Revenue: USD292.7 million

LTM EBITDA: USD209.9 million

LTM EV/Revenue: 22.5x


Deal mechanics

All CCT unitholders received 0.72 CMT units (issued at USD1.92) and USD0.192 in cash per CCT unit, amounting to a scheme consideration of USD1.57 per unit. This gives a gross exchange ratio of 0.82 (consideration amount divided by CMT’s issue price). Given CCT’s FY2019 Net Asset Value (NAV) of S$1.8625, CMT bought the units at a P/NAV of 1.14. This represents a premium to the price that CCT was trading on the date of announcement (S$2.13). The aggregate cost of the acquisition is approximately USD6,120.1 million, comprised of the total scheme consideration (USD6,063 million) and an acquisition fee of USD41.1million.

It was initially planned for the deal to close by June 2020. However, the implementation of circuit breaker measures in Singapore delayed the plans and the 2 REITs entered into a supplemental agreement to extend the long-stop date for the transaction from 30 September 2020 to 30 November 2020. CapitaLand Commercial Trust (CCT) delisted on 3 November 2020 and CapitaLand Mall Trust (CMT) began trading as CapitaLand Integrated Commercial Trust (CICT) on the same day.


The combined entity, CapitaLand Integrated Commercial Trust, owns 24 properties with a Net Lettable Area of 10.4 million square feet and 3,300 tenants. Its Net Property Income is S$1.0 million and its Portfolio Property Value is S$22.4 billion. The merger is DPU accretive to both CMT unitholders (+1.6%) and CCT unitholders (+6.5%).

Upside from potential synergies

The merger is expected to offer revenue and cost synergies. Firstly, the broader combined leasing network allows for more effective tenant negotiations and sourcing for high-quality tenants, leading to cross-selling opportunities. In addition, the merger contributes to the creation of an enlarged and unified digital platform catering to both the retail and office portfolios (integration of CapitaStar@Work and CapitaStar Programme). The enhanced analytics capability will lead to more informed, data-driven decision-making and better consumer insights. Lastly, cost optimisation is established through economies of scale, supported by bulk procurement, supply chain optimisation and elimination of frictional costs.

Merger will lead to more resilience through cycles

The combined entity will exhibit a more balanced exposure to office and retail properties. The merger has reduced the asset concentration risk, with the top 5 assets' NPI contribution falling from 50% in CMT and 83% in CCT to 43% in the new entity. The improved diversification can help offset the income volatility due to asset upgrading or redevelopment.

Larger headroom for development and overseas expansion

Development has always been challenging for CMT and CCT, as the Monetary Authority of Singapore restricts the development work that REITs can undertake to 10 to 15% of their property values. The merger will increase redevelopment headroom from $3bn to $6n, allowing the REIT to undertake new developments to leverage on real estate trends or undergo redevelopments to adapt to the long term impacts of the COVID-19 pandemic.

While the new entity remains Singapore-focused, the increased capital from the merger enhances its ability to take on more cross-border transactions. The management hopes to raise the company’s overseas exposure from 4% to 20%. CICT may find its integrated development model applicable to other land-scarce metropolitan cities such as Tokyo, Sydney and London, and could pursue collaborative developments or expand its footprint in that direction.

Combined expertise allows CICT to leverage on the trend of mixed-use developments (supporting growth and stability)

The acquisition is a timely move by CMT to diversify away from pure-play retail REITs, against the backdrop of the growing e-commerce popularity. However, instead of solely adding office REITs to its portfolio, the merger allows CMT to leverage on CCT's expertise in office properties to develop mixed-use spaces that integrate both office and retail elements.

This is in line with the Urban Redevelopment Authority’s (URA) plan to rejuvenate the Central Business District using the ‘Live, Work and Play’ philosophy. Mixed-use developments are particularly important for Singapore, where land scarcity is of great concern. Proximity to retail amenities is also a key preference for office workers in the hot and humid city-state. The merged entity is poised to capture this trend as its assets are strategically located across growth clusters in Singapore.

Moreover, the onset of COVID-19 pandemic caused a shift toward remote working and reduced footfall to physical retail stores. Combining retail and office spaces may incentivise employees to come to work and enhance footfall to shopping malls.

Risks and uncertainties

The merger has increased leverage on the company’s balance sheet. The new entity is expected to have 38.3% of leverage, compared to 32.9% for CMT and 35.1% for CCT at the end of 2019. The is due to the additional debt taken by CMT to pay for the cash component of the deal.

Moreover, the current pandemic COVID-19 has had an enormous impact on Retail and Office occupancy rates. Given social distancing measures and potential lockdowns, footfall to physical shopping malls have dipped and many consumers have turned to e-commerce. Further to this, visitor arrivals to Singapore are projected to fall by 25-30% this year. The uncertainties surrounding the pandemic may also make it difficult for CICT to plan further development plans for the merged entity.

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