During a recent informal chat with CLI’s group CFO, Paul Tham, where the main subject was private credit, he said: “As we move to an increasingly fee income-focused business, we shouldn’t be looking at NAV (net asset value).”
One of the traditional methods of valuing property companies is looking at their price to book value (P/NAV) ratios and price to revalued NAV (RNAV). For CLI, investors should be looking at its price-to-earnings multiple. “We’ve been doing investor education and engaging with retail investors for the past three years. We’ve investors from the US and Europe who are familiar with Blackstone and Brookfield. Even for Australian investors who look at, say, a Charter Hall or Goodman, we’ve realised there’s a little bit of progression required,” adds Tham, referring to Charter Hall Corp and Goodman Group, a couple of Australia’s best-known real asset managers.
JP Morgan and PhillipCapital both use sum-of-the-parts valuation (SOTP) for CLI. JP Morgan had an SOTP valuation of $3.35 for June 2026. This comprises a 16 times EV/Ebitda multiple for its asset management business in line with peers; 15 times EV/Ebitda for the lodging business; $7.4 billion for its stakes in various S-REITs as per JP Morgan’s fair values; $5.7 billion for CLI’s stakes in various unlisted funds and $3 billion for CLI’s investment portfolio (inclusive of assumed asset sales).
PhillipCapital has an SOTP of $3.65 comprising 16 times EV/Ebitda for the fee income business, $5 billion for CLI’s direct stakes in its real assets and funds, and $10.78 billion for the market value of its REITs.
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As a guide, the value of the effective stakes in the assets the company holds was announced in the FY2024 results presentation. In FY2024, the value of on-balance sheet assets was $4.3 billion, its stakes in the private funds were valued at $5.3 billion, and listed funds at $8.3 billion.
Growing fee income
CapitaLand Group split its business in September 2021, just as Covid-19 had receded. But that coincided with supply chain issues and rising inflation, leading to the interest rate upcycle. Interest rates affect every aspect of the economy. The most interest-sensitive companies are usually banks, REITs, property and other real assets.
See also: CapitaLand Investment’s group CFO Tham on growing private credit
“When interest rates went up, our earnings dropped quite a fair bit because we were paying a lot more in interest costs. But as we move more to a fee business, the interest component doesn’t impact us as much because we’re not borrowing against properties as much, and similarly, we’re a little bit less impacted by property cycles,” says Tham.
The disadvantage of owning investment properties is that the owner is tied to the interest rate cycle. “You’re tied to the cycles on the income from the assets (because of interest cost), and you’re also impacted by the mark-to-market movements on the fair values,” he adds.
Investors in data centres and logistics assets would have had valuation gains during the low-interest rate environment during Covid-19. But then, interest rates rose sharply, and the economy in China slowed, causing challenges for logistics properties in general but also creating further challenges for logistics properties which served the domestic Chinese economy. CLI and its Chinese-focused REIT, CapitaLand China Trust, own assets in China.
“If we can move the business to being fee-driven, we won’t have the fluctuations from the mark-to-market (gains and losses),” Tham says.
To gain more fee-driven income, in 2024, CLI announced two acquisitions that raised its funds under management (FUM) to $117 billion by 1Q2025. It completed the acquisition of a 40% stake in SC Capital Partners Group (SCCP) in 1Q2025 and the acquisition of Wingate Group Holdings (Wingate) in 1H2025. Both acquisitions provide CLI with additional private funds capabilities. SCCP focuses on private equity funds and is the sponsor of a listed J-REIT. Wingate’s focus is private credit.
To take a step back, CLI has two main sources of revenue: fee-related earnings (FRE) and real estate investment business (REIB) income. FRE is derived from four sources: fees from commercial management, fees from lodging management, fees from REITs and fees from private funds.
Commercial management — previously property management — is CLI’s largest source of FRE. In recent years, CLI has sourced management contracts managing malls in Singapore and China. Since the CapitaLand Group’s mall management is seen as almost a gold standard in Asia, this source of FRE is stable and could grow. For instance, in Singapore, CLI manages SingPost Centre and Kallang Wave Mall. Altogether, CLI manages nine third-party properties.
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Lodging management is the second largest source of FRE, and CLI has ambitions to grow this by growing its properties under management. In April 2023, CLI announced that Ascott, its lodging unit, had plans to grow its FRE to $500 million in five years (2028). In FY2024, FRE from lodging management was $343 million.
REITs provide their sponsors with base fees, performance fees, divestment and acquisition fees. Base fees are annuity-like. The larger CLI’s REITs’ assets
under management (AUM), the larger its annuity-like base fee. Of course, CLI has to ensure its REITs are well managed, and they own the best assets.
Performance fees for CapitaLand Integrated Commercial Trust (CICT) and
CapitaLand Ascott Trust (CLAS) are likely to be fairly regular. CICT’s performance fee is based on a percentage of net property income; CLAS’s performance fee is a percentage of gross profit (which is similar to NPI) coupled with a hurdle rate. CapitaLand Ascendas REIT’s (CLAR) performance fee is based on DPU growth. Acquisition and divestment fees only materialise when REITs acquire or divest assets.
The details of the fee structures of CLI’s private funds are not revealed in detail, but both the CEO and Tham have indicated there is a base fee and a “carry”. Carried interest is the equivalent of performance fees.
Getting to operating patmi of $1 billion
During its investor day in November 2024, CLI’s management reiterated an FUM target of $200 billion, with an aim to raise operating patmi to $1 billion by 2028-2030. In FY2024, operating patmi fell by 10% to $510 million. Why $200 billion in FUM? ”If you’re not more than US$100 billion in FUM, you’re really not sizable enough. And $200 billion just seemed like a natural target,” Tham says.
Keppel has also turned into a global asset manager with a $200 billion AUM target. “It was more coincidental than anything else. To be at a credible size, to be a global player,” Tham says of the $200 billion target. “The market is consolidating for fund managers. We are seeing larger fund managers taking larger market shares, and we’re seeing investors consolidate the number of fund managers they use.”
What would get CLI to its $200 billion in FUM? As Tham sees it, the additional $83 billion in FUM could come from new private equity funds and private credit funds. Tham oversees CLI’s private credit business and believes private credit funds could rise to $20 billion to $30 billion of FUM by 2028.
Analysts reckon that CLI’s REITs could also play a part in growing FUM. For one thing, by the end of this year, CLI is targeting a seventh listed REIT, CapitaLand Commercial C-REIT, to be listed on the Shanghai Stock Exchange. The others are CICT, CLAS, CLAR, CLCT, CapitaLand India Trust, CapitaLand Malaysia Trust and a stake in Japan Hotel REIT from its share in SCCP.
Analysts are expecting CICT to acquire the 55% stake in CapitaSpring that it does not own from CLD and Mitsubishi Estate Co. Other properties within the CapitaLand Group that could fit into CICT in the far future are Clementi Mall, owned jointly by CLA Real Estate and Mapletree Investments, and Jewel Changi Airport, jointly owned by CLD and Changi Airport Group.
CLAR has announced the acquisition of 9 Tai Seng Drive and 5 Science Park Drive for $700.2 million from CLD, taking its asset size to a pro forma $17.6 billion. Shopee occupies 5 Science Park Drive. CLAR also owns a 34% stake in 1 Science Park Drive and has the first right to acquire the remaining interest it doesn’t own from CLD.
How would CLI get to $1 billion in operating patmi? “We need to grow the fee income part of the business faster than we have been growing. Ideally, we should be getting healthy double-digit growth every year in order to make up for the divestment of properties. The beauty of it is, if we can grow the fee business more, we become less impacted by property cycles,” says Tham. “The key for us to maintain and grow our dividends is to be able to grow the fee business faster.”
In FY2024, (when CLI had FY2023’s FUM of $99 billion), it earned around $350 million in operating patmi from the fee income business. With an FUM of $200 billion, operating patmi could get to $700 million, with economies of scale, providing an additional uplift. “When we’re about $700 million (in operating patmi) from fee income, hopefully we get economies of scale. We expect 70% to 80% if not more, of our earnings to come from the fee business,” adds Tham.
The remaining 20%-30% of operating patmi will be from CLI’s investments in its REITs, funds, joint ventures, if any, and real assets. “We think that will make up the difference. Ideally, it ties to our $200 billion in FUM. If commercial management and lodging management continue to grow, then we should get to $1 billion in profits,” he says. “That’s how the math works. Whether we can execute is the real challenge for us. If the share price gets back to $4, we will think we have recovered.”
CLI last traded at $4 before the interest rate hike cycle in 2022.
