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CMT, CCT propose merger to create largest REIT in Singapore: proposed terms

SINGAPORE (Jan 22): CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT) are proposing to merge into a diversified commercial real estate investment trust (REIT) to be named CapitaLand Integrated Commercial Trust (CICT).

The merged entity is expected to have a market capitalisation of $16.8 billion and a combined property value of $22.9 billion, making it the largest REIT in Singapore and the third largest in Asia Pacific.

CICT brings together CMT’s portfolio of 15 malls in Singapore with CCT’s portfolio of 10 office assets in Singapore and Germany. The managers say the move will see CICT become the largest proxy for Singapore commercial real estate.

The proposed merger will be via a trust scheme of arrangement, with CMT acquiring all units of CCT for a total consideration comprising approximately 88% in new units in CMT and 12% in cash.
For each CCT unit held, a unitholder will get 0.720 new CMT units and $0.2590 in cash. This implies a gross exchange ratio of 0.820.

Following the proposed merger, property developer CapitaLand will retain its sponsor stake of approximately 29.1% in the merged entity.
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WHY CCT & CMT propose to merge

CMT and CCT are heading to the proposed merger from a position of strength. This is a game-changer that will propel both CMT and CCT towards a higher and more sustainable growth trajectory beyond what is achievable with each REIT’s current focus on a single asset class,” says Teo Swee Lian, chairman of the manager of CMT.

Soo Kok Leng, chairman of the manager of CCT, notes that around 29% of the combined portfolio value of the two REITs already features integrated retail and office components, including Raffles City Singapore, which is co-owned by CMT and CCT.

“It is therefore a logical progression for both REITs to come together as one entity to more efficiently capture additional growth opportunities over the long term,” Soo says. “Our complementary skill sets will strengthen the ability of the merged entity to capitalise on future growth opportunities.” The REIT manager note that, on a pro forma basis, FY2019 distribution per unit (DPU) would have increased by 1.6% for CMT, and by 6.5% for CCT.

“The merged entity will have a combined property value almost double that of CMT’s, and a 75% larger market capitalisation from where we are today,” says Tony Tan, CEO of the CMT manager. “With a more balanced exposure across retail, office and integrated developments; reduced asset concentration risk; and a well-diversified tenant base, the merged entity can offer greater stability through market cycles.”

“While Singapore remains the predominant focus, the merged entity can undertake overseas acquisitions in developed countries of up to 20% of property value or $4.6 billion,” Tan adds. “Our capital can thus be efficiently deployed to where we see the best risk-return opportunities across asset classes and markets.”

“With an enlarged balance sheet and a higher debt headroom, we will have greater financial flexibility to power our organic and inorganic growth through more proactive asset enhancements and larger investments,” says Kevin Chee, CEO of the CCT manager.

“With greater funding capacity, we can also act more swiftly and provide certainty of financing for third-party acquisitions,” he adds.

The proposed merger is subject to the approval by unitholders of CMT and CCT at the respective extraordinary general meetings to be convened, the approval by unitholders of CCT at a scheme meeting, as well as regulatory and other third party approvals.

After obtaining the necessary approvals, the proposed merger is expected to be completed before the end of 2Q 2020. Thereafter, CCT will become a wholly owned sub-trust of CMT and will be delisted from the Singapore Exchange.
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Siao liow. Sure mati. Was suppose to release this evening. Somebody must have looked at it and say........ "results so good, let us postpone the release until further notice" Or "sh%t, we can't releas

https://sgtalk.org/mybb/Thread-CCT-postp...her-notice
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Next merger on the card - MLT and MIT and MCT? Laughing
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22-1-2020 9:58 AM
sudoku said:
Siao liow. Sure mati. Was suppose to release this evening. Somebody must have looked at it and say........ "results so good, let us postpone the release until further notice" Or "sh%t, we can't releas

https://sgtalk.org/mybb/Thread-CCT-postp...her-notice

Bro, the results are good! See above...

https://links.sgx.com/FileOpen/CCT_News%...eID=594055
Raw Video doesn’t lie; Liberal Journalism does.
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22-1-2020 10:04 AM
moneyspinner said:
Next merger on the card - MLT and MIT and MCT? Laughing

Could be Ascendas India Trust and Capitaland Retail China Trust to form an OVERSEAS Asia Trust..
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Ascendas REIT : Looking for the next billion

Maintain BUY, TP revised to S$3.45. A-REIT continues to take sizeable steps on the acquisition front, acquiring close to S$2.6bn in new properties over the past two years. While these acquisitions introduced new geographies of UK and US for A-REIT, we believe this diversification will be beneficial to A-REIT in the longer term as it accelerates the REIT’s organic growth profile. Incorporating the recent acquisitions and rights issues, our estimates are adjusted higher and TP raised to S$3.45.

Where we differ: US diversification brings benefits. While a new geography brings about its own element of risk, we believe that the US portfolio will over time prove to be beneficial for A-REIT’s portfolio. The properties are located in key technology hubs in San Diego, Raleigh and Portland which see strong technology push in the cities’ GDP, employment and leasing demand. We anticipate upside to the initial yield of 6.4% for the US portfolio when the leases come due in the coming years. In-built escalations of 2.5-4.0% anchor the REIT’s organic growth portfolio.

Where will be A-REIT’s next billion? A-REIT’s share price is trading within a virtuous cycle at an implied cost of capital that is conducive for accretive acquisitions We believe the next billion will likely come from its Singapore business park properties in One North region, which its sponsor will be looking to divest and are expected to be well received by investors.

Risks
Interest rate risk. Any increase in interest rates will result in higher interest payments, which will reduce income available for distribution and result in lower distribution per unit (DPU) to unitholders.

Valuation
Our DCF-based TP is raised to S$3.45 post recent M&A activities. Maintain BUY.
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Merger to create CapitaLand Integrated Commercial Trust, Asia-Pac’s 3rd largest REIT: VIEWPOINT

CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT) have jointly proposed the merger of their two REITs to create a diversified commercial REIT, CapitaLand Integrated Commercial Trust (CICT), through a trust scheme of arrangement. CMT will pay $2.1238 for each CCT unit comprising 0.72 new CMT units and $0.259 cash.

The total consideration of $8,192.8 million comprises 2,777.5 million new CMT units at an issue price of $2.59 each or $7,193.7 million (88% of total price), and cash consideration of $999.1 million (12% of total price).

The merged entity will double in size in terms of AUM to $22.9 billion and its market cap will be $16.8 billion, making it Asia-Pac’s third largest REIT, and obviously the largest S-REIT by quite a large margin. Both CMT and CCT are in important indices such as MSCI, Straits Times Index and FTSE EPRA NAREIT Index. CICT would just be larger component in indices based on market cap.

The proposed merger is subject to unitholders' approval during EGMs to be convened by CMT and CCT by May 2020. The merger is expected to complete by Jun 2020 if all approvals are received.
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Advantages of the merged entity (of CCT & CMT)

Upon completion of the Merger, the Merged Entity will have the ability to undertake up to $4.6 billion worth of overseas acquisitions in developed countries (assuming up to 20% overseas exposure), while remaining predominantly Singapore focused. Development headroom would rise to $6 billion based on current REIT regulations, from the current $3 billion each for CMT and CCT. Debt headroom – assuming gearing of 45% - rises to $2.9 billion.

There will be reduced asset concentration risk as net property income (NPI) contribution from the top 5 assets of the Merged Entity will be reduced to 43%, compared to CMT’s existing 51% and CCT’s existing 83%. This increased diversification reduces earnings vulnerability and increases its flexibility to unlock value and reconstitute its portfolio with a lower impact on NPI. The Merged entity will be almost evenly divided between retail, office and integrated developments (which is mainly Raffles City).

The Merged Entity will enjoy significantly enhanced ability and flexibility to undertake larger redevelopments and asset enhancement initiatives (AEIs) to deliver organic growth for unitholders according to presentations made by Tony Tan, the CEO of CMT’s manager, and Kevin Chee, the CEO of CCT’s manager.

During a briefing on Jan 22, when asked about the CEO of CICT’s manager, no clear answer was given. “At this moment the focus is to cross the finishing line. Both teams are working alongside for this deal. We see a lot of complementarity effects,” Tan says.

When asked about whether CapitaLand Retail China Trust would also be merged, Tan says: "the whole reason why we want to do this merger is because we want to be the clear leader in Singapore and no 3 in Asia-Pac. CRCT would represent 1% of our exposure." He adds that CICT's focus is mainly Singapore and up to 20% of assets could be in developed markets. Emerging markets are unlikely to be CICT's focus.
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What happens to fees? (after the merge of CCT & CMT)

Interestingly, CCT has one of the lowest fee structures and the lowest fees as a portion of assets, revenue, NPI and distributable income among S-REITs. Its fee structure is also a lot more efficient than CMT’s. CCT’s base fee comprises just 0.10% of the value of deposited property and the performance fee is 5.25% of the net investment income (which is similar to distributable income). CMT’s base fee is 0.25% of the value of the deposited property and performance fee is 4.25% of the NPI.

Tan says for existing assets of CCT, its current fee structure applies and for existing assets for CMT its current fee structure applies. New assets in the merged entity will be based on CMT’s fee structure.
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