CapitaLand Commercial C-REIT (CLCR), CapitaLand Investment’s (CLI) eighth listed fund, opened 19.6% higher than its initial public offering (IPO) price at RMB6.84 on the Shanghai Stock Exchange (SSE) Sept 29, before closing at RMB6.44, up 12.63% on its debut trading day.
CLCR raised RMB2.29 billion ($409 million) by issuing 400 million IPO units at RMB5.718 per unit, exceeding the initial estimate of RMB2.14 billion by 7%. Based on the IPO price, CLCR’s forecast distribution yield is 4.40% for FY2025 ending Dec 31 and 4.53% for FY2026.
CLCR is China’s first international-sponsored retail C-REIT. Its offline institutional tranche was oversubscribed 253 times earlier this month, setting a new record among retail C-REITs in China. The IPO also saw strong retail interest, with the public tranche closing ahead of schedule and being 535.2 times subscribed.
Speaking in Mandarin at CLCR’s listing ceremony on Sept 29, CLI China CEO Puah Tze Shyang says the oversubscription “underscores the market’s dual recognition of CLI's asset management capabilities and the resilience of China’s consumer market”.
Puah adds: “Although we bring over 20 years of REIT management expertise, we believe that respect is earned, not given; and we remain committed to earning our stripes.”
In China, institutional investors participating in the bookbuilding exercise are referred to as offline institutional investors, while those subscribing through the public tranche are known as online institutional investors.
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The majority of the IPO units were allocated to insurance companies, securities firms and “strategic capital investors”, according to CLI. Representatives from DBS and HSBC attended the Sept 29 listing ceremony.
According to CLI’s Sept 12 announcement, cornerstone investors took up 40.11% of the units, while offline institutional investors were allotted 27.92% in the bookbuilding tranche. Online institutional investors subscribed for the remaining 11.97%.
Only Chinese investors can invest in CLCR. CapitaLand China Trust (CLCT) is a diversified multi-asset class vehicle targeting global investors, with an investment mandate that spans retail, office and industrial assets across Greater China; while CLCR invests exclusively in retail assets in mainland China, targeting domestic investors.
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CLI, CLCT and CapitaLand Development (CLD) collectively hold a 20% interest in the IPO units. CLCT, in particular, subscribed for a 5% strategic stake in CLCR at the IPO price of RMB5.718 per unit.
“When you combine CLCR and CLCT, what is interesting is that [CLCT] is a REIT-of-REITs,” says Puah to Singaporean media.
“We serve foreign investors wanting China exposure through its stake in CLCR, it serves a purely domestic, institutional and retail clientele, but when you switch over, we also have insurance capital that feels a bit like a CLCT, because it’s diversified, but it will then allow us to take on a little bit more risk.”
Puah adds: “That’s the beauty of the domestic-for-domestic strategy that we have. We have different platforms, and we are then able to serve a wider or more diversified capital pool.”
About the IPO portfolio
To seed CLCR’s IPO portfolio, CLI and CLD have divested CapitaMall SKY+ in Guangzhou and CLCT is divesting CapitaMall Yuhuating in Changsha into CLCR. CLI expects the divestment to be legally complete by end-October.
CapitaMall SKY+ is located in Guangzhou’s Baiyun Central Business District, directly connected to Baiyun Park subway station. Meanwhile, CapitaMall Yuhuating is a community mall located in Changsha’s Yuhua District, accessible via two adjacent subway stations on two lines as well as a future subway station on a third line.
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The two malls have a combined value of approximately RMB2.6 billion. They span a total gross floor area (GFA) of 168,405 sqm and have an overall committed occupancy rate of 96%.
As the sponsor and the asset manager of CLCR, CLI will continue to operate CapitaMall SKY+ and CapitaMall Yuhuating.
Additionally, CLI says it will support the growth of CLCR and CLCT through its ability to offer a “quality pipeline of potential assets”. In China, CLI manages 43 operational retail properties across 18 cities with total retail assets under management of approximately $18 billion.
Retail C-REITs
The China Securities Regulatory Commission and National Development and Reform Commission have progressively launched C-REITs across different sub-sectors since June 2021.
With the listing of CLCR, there are now 75 C-REITs across various asset classes, including rental housing and logistics. As at Sept 19, prior to CLCR’s debut, the 74 C-REITs have a total market capitalisation of some RMB221 billion.
Retail C-REITs, in particular, were launched in March 2024 under the broader “consumer infrastructure” or “consumption” labels. Since then, 10 retail C-REITs have listed, but only with one retail asset each, in line with Chinese regulations. Among them is Harvest Wumart Consumer REIT, which listed on the SSE in March 2024 with an underlying supermarket asset located in the central urban area of Beijing.
CLCR, along with its peers, faces a one-year moratorium from its listing date, which blocks new acquisitions. Speaking to the media, Puah says regulators could be looking at halving this period. “For now, we are just waiting [to see] whether we can start to inject more stabilised, quality assets after six months, rather than a year.”
The earliest retail C-REITs, which have spent a year and a half on the market, are preparing to grow their portfolios. The sponsor of China Resources Mall REIT, which listed on the Shenzhen Stock Exchange in March 2024, has identified and announced their next injection of assets, says Puah.
CLCR is the first retail C-REIT to list with two assets in its IPO portfolio. Puah believes this concession will allow CLCR to show that “scale and diversity is important”. “We bring forward this message to the regulator, but we are still bound by national rules.”
Puah adds: “The market appreciates us as well, because we clearly have a pipeline… If I’m a C-REIT investor, I would definitely look towards someone — a sponsor — who is able to add scale and diversity, because that really enhances the performance of the C-REIT.”
Beyond CLCR, CLI is “very open” to working on a ninth listed fund, says Puah, but the “first order of business” is to “make sure CLCR trades well”. “We are always looking out for how the market changes [and] how the market evolves. We are in the business of running the largest REIT franchise in Asia Pacific. So, if there’s a chance for me to add to [CLI’s] REITs [funds under management], yes, we will do it.”
Sub-fund closes
In addition to the listing of CLCR, CLI has closed the first sub-fund, China Business Park RMB Fund IV, under its inaugural onshore master fund in China — the CLI RMB Master Fund.
Established in May with a major domestic insurance company as co-investor, the Master Fund has RMB5 billion in total equity commitment and invests in a series of sub-funds that acquire income-producing assets with long-term growth potential.
In a Sept 29 announcement, CLI says the China Business Park RMB Fund IV closed with an equity commitment of RMB529 million from the Master Fund.
As part of its capital recycling strategy, CLI has divested a business park into this sub-fund.
CLI also plans to launch a second sub-fund focused on retail assets in 4Q2025 with a target equity commitment of RMB900 million.
“CLI has a pipeline of retail assets, logistics parks and rental housing across Tier 1 and top Tier 2 cities that could potentially provide growth opportunities for this platform,” reads CLI’s announcement.
Since 2021, CLI has raised a total of RMB54 billion across its eight onshore funds.
Overall, CLI has recapitalised approximately RMB5 billion of assets in China year to date.
In prepared remarks, Puah says: “The listing of CLCR and the continued growth of our RMB Master Fund demonstrate strong momentum in our capital recycling journey and pivot to asset-light business model… The listing of CLCR and our RMB funds also support our domestic-for-domestic fund strategy to tap into China’s substantial capital market to grow our funds under management and recurring fee income.”
