To put investors’ minds at rest, Tan was quick to announce that he would focus on Singapore, following minor setbacks in late 2021 and early 2022, when CICT acquired three Australian properties.
“CICT is one of the best proxies for Singapore commercial real estate for people who are looking to get exposure into Singapore’s retail as well as office market,” says Tan, referring to CICT’s latest acquisition, CapitaSpring, which — along with UOB Plaza 1, One Raffles Place and Republic Plaza — are the tallest buildings on the island.
In a recent report, analysts Terence Khi and Mervin Song at JP Morgan concur. “CICT remains a top pick and, we believe, should anchor investors’ portfolios. CICT is a unique S-REIT having delivered consistent 1.5% p.a. distribution per unit (DPU) growth over the past three years and going forward a three-year DPU CAGR of 5%, a rare occurrence in S-REITs’ 20-year history,” the duo write.
One of the first questions was whether CICT is likely to scale up overseas. The answer to that question is probably no. “For Germany, it’s fairly straightforward; we wouldn’t scale up. In fact, we don’t have that big of a presence there. In any case, it’s only 2% of assets,” Tan answers.
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What about Australia? “We will focus on Singapore first because if there are enough things to do here, there’s no reason for us to think about going overseas and we have proven over the last few years that there are enough things for us to do locally,” Tan emphasises.
In 1H2025, suburban retail contributed 28.8% to gross revenue, followed by CBD office (27.1%), downtown retail (26.8%), hotel and convention (6.4%), integrated development office (6%), Australian office (3.4%) and German office (1.5%).
The valuation of CICT’s overseas acquisitions has fallen since they were acquired. For instance, the valuation of its Gallileo commercial building in Frankfurt’s CBD was EUR360.9 million or $577.4 million in 2018, with CapitaLand Commercial Trust (CCT) paying $548.3 million for a 94.9% stake, including expenses. As of Dec 31, 2024, Gallileo was valued at the equivalent of $363.7 million.
In 2021, CICT acquired Sydney office buildings 66 Goulburn Street for a property value of $300 million and 100 Arthur Street for a property value of $372 million. As of end-FY2024, 66 Goulburn Street was valued at $205.5 million and 100 Arthur Street was valued at $261 million.
According to CICT’s FY2024 annual report, the Australian portfolio valuation saw a 15.2% y-o-y drop mainly due to an expansion in capitalisation rates and discount rates. A further downward impact was due to the exchange rate, as the Australian dollar weakened against the Singapore dollar in FY2024 compared to FY2023. According to CICT’s presentation, the vacancy rate in North Sydney CBD, where 100 Arthur Street, 101–103 Miller Street and Greenwood Plaza are located, was 20.5% in 2Q2025. CICT owns 50% of 101–103 Miller Street and Greenwood Plaza. The property was acquired in 2022 for A$422 million and was valued at A$326 million as of end-2024.
Nonetheless, CICT’s FY2024 portfolio valuation was $26.035 billion compared to $22.035 billion as of end-FY2021 and $24.219 billion as of end-FY2022 due to the stability of its Singapore portfolio.
With the Aug 4 announcement of the acquisition of CapitaSpring and its completion on Aug 26, CICT’s Singapore portfolio will account for 95% of its enlarged (pro forma) $27 billion in assets.
“This year, we acquired CapitaSpring; last year, we acquired ION Orchard. These are significantly large transactions. They are accretive acquisitions and add meaningful scale to our business. Our assets are of such high quality that we are comfortable holding them for the very long term,” Tan says.
In addition, Tan believes that size has benefits. The bigger you are, the more resilient your income is. With CapitaSpring, it makes extensive asset enhancement initiatives (AEIs) for its older assets an easier task, should there be an impact on DPU.
Safe haven status
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Globally, diversification away from the US dollar has increased interest in alternative safe havens. “The Singapore dollar is one of these, having earned a reputation for being one of the safest and most stable currencies in Asia. This is backed by a 25-year track record of appreciation averaging 1.55% per annum, which in turn is underpinned by a unique managed float of the currency, firm economic growth, strict fiscal discipline and Singapore’s rise as a global hub for service,” says Jen-Ai Chua, equity research analyst for Asia, Julius Baer.
“Amidst the ebb and flow of globalisation and the rise and fall of nations, some currencies have held their value better than others. The Singapore dollar, together with the Swiss franc, is the only major currency to have consistently posted positive 10-, 20- and 30-year spot returns against the US dollar,” she adds.
“We want to be what investors think of when they think about investing in Singapore’s commercial real estate. I don’t mean just Singapore investors. I mean global investors who are also looking to deploy capital into Singapore commercial real estate. Instead of buying direct physical real estate, they can invest in CICT as a proxy,” Tan says.
“Investors are also viewing CICT as an alternative to direct real estate investments, as it offers an implied cap rate of 4.7%, which is more attractive compared to low 3% to low 4% cap rates for prime office and retail assets currently,” write Khi and Song of JP Morgan.
Tan also points out that CICT’s DPU is very clean. He believes there is no point in financial engineering, as investors will look through it. “Institutional investors do their own analysis,” he says.
Demand for Singapore dollar assets was supported by CICT’s private placement, which partly funded CapitaSpring’s acquisition. Originally, CICT’s manager had planned to raise $500 million, but the private placement was upsized to $600 million and was 4.9 times covered. The acquisition, based on the upsized placement, provides 0.9% pro forma DPU accretion and a pro forma gearing of 37.9%, compared to 38.3% previously, and 1.1% pro forma DPU accretion based on $500 million in new equity.
“The feedback we got was that, yes, people are looking at Singapore as a safe haven. There are many funds actively exploring opportunities in Singapore. CICT is likely one of the best proxies for Singapore’s commercial real estate for individuals seeking exposure to the country’s retail and office markets. The team has been hosting investors visiting our properties to give them a better sense of what our properties are like, and how good a team we have on the ground in terms of asset management, property management, as well as our curation of tenants and retail,” Tan explains.
Since CICT owns 45% of CapitaSpring and has acquired the 55% it does not own, its investors and its manager are familiar with the property.
Transactions can be complicated. CapitaSpring’s serviced residence component was divested in May. That left the office building, which made it a “cleaner” transaction. Sora had fallen significantly, CICT’s unit price had risen to $2.24 on Aug 4, the day before the placement. This lowered CICT’s cost of capital.
Global demand for SGD assets helped. In addition, Tan didn’t want the acquisition to be near the expiry of the call option in 2026, which is why the acquisition’s timing was a bit of a surprise for some market-watchers.
Who were the investors in the placement? “You will see three types of investors: Long-only funds, hedge funds and the private bank customers. Within the long-only funds, you categorise them into generalists and real estate specialists. We were fortunate that investors were keen to subscribe. We ended up allocating quite a majority of our book to long-only funds [and] only a small percentage to private banks and hedge funds,” says Tan, declining to give exact percentages.
“We don’t typically disclose the exact percentage, but [they are] small compared to a typical book. You don’t really know how long they will hold. It’s always in the best interest of everybody if we have more long-only [funds] in the book, because then it also supports the aftermarket performance,” he adds.
The strength of CICT’s unit price following the placement was an indication that institutional investors and high-net-worth investors did not divest of their CICT units to acquire the new placement units, market watchers indicate.
ION Orchard outperformed
In September last year, when CICT initially announced the acquisition of ION Orchard for $1.1 billion, including expenses, the pro forma DPU accretion was 0.9%, assuming the acquisition would be funded by net proceeds from an equity fundraising (EFR).
70% of the total management fees for the whole portfolio (including ION Orchard) will be payable to the manager in the form of units. CICT added in small print: “Assuming that 50.0% of the total management fees for the whole portfolio (including ION Orchard) will be payable to the manager in the form of units and that tax transparency at ION Orchard is achieved, pro forma DPU would be (0.4%) for the 1H2024 period.”
ION Orchard is currently subject to a corporate income tax rate of 17% due to its corporate structure. CICT had indicated that the potential conversion of ION Orchard’s holding entity to achieve tax transparency will result in tax savings and enhanced earnings, subject to the joint venture partner’s agreement and relevant authorities’ approval.
As it turned out, ION Orchard did better than the assumptions. In 1H2025, CICT was able to report that distributable income rose 12.4% y-o-y to a record $411.9 million, while 1H2025 DPU increased 3.5% to 5.62 cents despite the enlarged unit base as a result of the EFR for ION.
The better performance was underpinned by the full six-month contribution from ION Orchard, as well as the better performance of our existing portfolio and lower interest expenses, Tan says. Aggregate leverage improved to 37.9%, down 0.6 percentage points from end-2024, due to higher valuations in Singapore resulting from better performance.
Tax transparency will impact the DPU accretion. However, it is an item that is subject to the JV partner’s agreement and the approval of the relevant authorities before the manager can have certainty on whether there will be a conversion of the property holding entities to allow for tax transparency. During CICT’s results briefing on Aug 5, Tan said the tax transparency issue will take a long time, at least a year.
“Not only do we need to find a structure that works for our partner, but we have to come up with a structure that works and does not cost the partner anything because the partner doesn’t benefit from the tax transparency. Tax transparency [structure] needs to be held through a trust. Joint ventures are created with a special purpose vehicle (SPV), which by themselves don’t enjoy tax transparency,” Tan says. He adds that ION Orchard’s performance has exceeded the underwriting assumptions made last year in 1H2025.
“We will just assume there is no tax transparency,” he adds.
Tenants as partners
Retail tenants, like all tenants, will always seek lower rents. As an example of a REIT that works with tenants rather than pushing up rents, Tan points out that CICT’s tenant retention rates remain high.
During a results briefing on Aug 5, he indicated that retail and office retention rates rose compared to the first quarter. “This reflects the tenants’ confidence in our properties,” he said. The retention rate for retail was 81.8% and the office retention rate was 76.8% in 1H2025, compared to 79.2% for retail and 75.7% for office in 1Q2025.
“Generally, our feedback from tenants has been good and that’s the reason why they continue to be our tenants. If tenants find the rent too high, occupancy rates will not reach 99%, so people must find value. We can provide a good tenant mix and drive footfall for our tenants,” Tan says.
As a case in point, a surprising addition to Raffles City, an integrated development owned by CICT, is the opening of Books Kinokuniya in July, in a 3,000 sq ft space. Ervin Yeo, chief strategy officer and CEO of commercial management at CapitaLand Investment, CICT’s sponsor, said on the sidelines of the Aug 5 results briefing that Kinokuniya’s sales are better than expected.
“One thing we can all agree on is that they don’t pay the highest rates. We believe it enhances the trade mix. Their sales have far surpassed expectations. They took a record $100,000 in three days. But more importantly, it’s on the third floor and we looked at the sales of the dependents adjacent to it,” Yeo says.
According to Yeo, Kinokuniya is “trying out” the Raffles City space on the third floor, and the store has drawn traffic to Level 3, where PS Café and Surrey Hills Grocer are also located. The bookstore’s attracts the white-collar crowd and the space outside PS Café can be used for book launches, Yeo suggests.
In Tan’s view, happy tenants make investors happy. “We continuously bring in new-to-market brands to drive new visitors and tourists to our malls. Tenants appreciate what we do, which is why they are very happy to be in our malls. We won’t do well if our tenants start leaving in droves. So far, the examples [of unhappy tenants] are not specifically tenants in our malls.”
Rents and rental reversions, while cheered on by analysts, can sometimes be a hot potato for landlords, as was the case with Flor Patisserie, a neighbourhood bakery that shut in July after going viral for accusing its Siglap Drive landlord of hiking rent by 57%.
Tan explains that rental reversions of 10% mean the increase is approximately 3% per year, as retail leases are typically three-year leases.
In 1H2025, CICT reported rent reversion rates of 4.8% for the office portfolio and 7.7% for the retail portfolio, with suburban malls achieving a rate of 8.8% and downtown malls achieving 6.9%. “We like that stability. We also recognise that it’s a partnership with tenants. We want to grow with them; we want them to grow with us. We want them to be here for the long haul because if tenants leave and we have to find a new tenant, the downtime will also not be beneficial,” Tan explains.
The advantage of size is the ability to engage tenants on a portfolio level, rather than asset by asset, Tan points out. “There’s also a lot of cross-selling, supporting our tenants in our office as well as in our malls and within the CICT ecosystem, in our sister REIT, CapitaLand Ascendas REIT (CLAR). A tenant like Cold Storage is in our malls and is a warehouse tenant with CLAR.”
The next stage
Tan doesn’t see a need to change the primary focus, which is commercial property in Singapore. The REIT’s AEI plans are likely to continue. Having completed the AEIs of Phases 1 and 2 of IMM, where the return on investment (ROI) exceeded 8%, CICT will commence the AEI of Lot 1 and Tampines Mall. The ROI for Lot 1 is estimated to be more than 7%, while Tampines Mall’s will be around 7%.
Gallileo’s extensive AEI costing EUR 180 million ($271 million) is expected to be completed in 3Q2025 and will be handed over to the European Central Bank from “late-3Q2025” onwards.
The returns from AEI typically exceed those of outright inorganic acquisitions. ROI on capex or AEI is typically 7%-8%. “The other [strategy], which is rarer but adds significant value, is redevelopment,” Tan says.
For redevelopment, CICT would have to forgo net property income for some years while deploying capital expenditures. CapitaSpring and CapitaGreen are examples of redevelopments. “We have to dovetail [any plans] with the government’s plans for those areas. The government just came out with the Draft Master Plan, and we are studying that,” Tan says.
Singapore’s Draft Master Plan has identified Bishan 2.0 as a sub-regional centre. Several plots of empty land surround Bishan MRT. Junction 8, a CICT mall, is directly connected to Bishan MRT. “The fact that some of those town centres will grow and become more vibrant will also be beneficial to our assets, even if, at the end of the day, it doesn’t make sense for us to redevelop,” Tan figures.
In a Q&A ahead of its AGM on April 22, CICT’s manager was asked if it had any plans to acquire CapitaLand Development’s 49% stake in Jewel. The reply was ambiguous: “Asset acquisitions are considered and assessed along the following criteria: if they are a good fit to CICT’s portfolio and satisfy the investment criteria of potential for growth in yield, DPU-accretion, rental sustainability, potential for value creation, and have green ratings.”
The Business Times reported that Clementi Mall is up for sale. Tan says, “Until the vendor comes out and confirms it is running a process, we will just focus on completing our transaction.”
While ION Orchard has outperformed expectations, CQ @ Clarke Quay lost Haidilao as a tenant. In a media statement, CLI said, “We will be introducing a new concept to take over the space currently occupied by Haidilao hotpot and will share more details in due course.”
CICT’s 1H2025 DPU of 5.62 cents takes the annualised DPU to 11.24 cents, its highest since the pandemic era, but below 2019’s actual DPU of 11.98 cents. With rental income from Gallileo, better performance from the IMM Building AEI and CapitaSpring’s contribution in 2026, JP Morgan is forecasting DPU of 12 cents for FY2026.
As of Aug 25, CICT’s unit price of $2.28 is at a three-year high and above its net asset value (NAV) of $2.07. As such, it doesn’t make sense for CICT to engage in a unit buyback.
“A unit buyback only makes sense if you trade below the book value. We trade above NAV. When you buy back at a discount to NAV, it is NAV accretive. Also, on the one hand, we are issuing new equity. How can you issue equity and tell investors that you need money, yet go on to buy back units? That doesn’t make sense,” Tan says.
Tan’s sensible, down-to-earth way of managing CICT including his view on share buybacks is likely to be popular with unitholders, as evidenced by its unit price, which is at a three-year high.
