-- CapitaLand China Trust continues to extract value from its retail portfolio through well-timed asset rejuvenations and refreshing its tenancy mix to enhance shopper experience and bolster income growth. The portfolio was boosted by a 13.7% increase in net property income of three malls post-AEI, which included Rock Square.
CapitaLand China Trust (CLCT) reported a net property income (NPI) of RMB1,219.1 million for the financial year 2024 (FY 2024). CLCT’s stronger retail performance was offset by the absence of contributions1 from CapitaMall Shuangjing and CapitaMall Qibao, along with lower contributions from its business parks and logistics parks, resulting in a 5.8% year-on-year (y-o-y) decline in NPI.
On a like-for-like basis for CLCT’s nine retail assets1, retail NPI increased 1.9% y-o-y in FY 2024. The three malls2 that underwent asset enhancement initiatives (AEI) in 2023 demonstrated strong performance, achieving a 13.7% y-o-y growth in NPI and a blended return on investment (ROI) of about 14%, exceeding the cost of funds. The retail sector, the largest asset class in CLCT’s portfolio, accounted for 70.7% of the portfolio’s gross rental income as of 31 December 2024.
On the capital management front, CLCT leveraged lower RMB interest rates to reduce its overall cost of debt, issuing a CNH 400 million bond due in 2027 at 2.9% per annum in October 2024 to replace higher-interest SGD loans. This increased the proportion of its Renminbi (RMB) denominated debt facilities to 35%3 of its total debt as at 31 December 2024. CLCT aims to further raise this to approximately 50% of its loan book by the end of 2025.
For FY 2024, CLCT reported a distributable income of S$96.8 million and Distribution Per Unit (DPU) of 5.65 cents on an enlarged unit base. The distributable income for FY 2024 was impacted by lower performance from business parks and logistics parks, lower realised foreign exchange gain4 and foreign currency translation due to a weaker RMB against Singapore Dollar (SGD), partially offset by lower finance costs. Based on CLCT’s closing price of S$0.730 on 5 February 2025, the distribution yield for FY 2024 was 7.7%. CLCT’s Record Date is 14 February 2025, and Unitholders will receive the 2H 2024 DPU of 2.64 Singapore cents on 27 March 2025.
Mr Tan Tee How, Chairman of CLCTML
Mr Tan Tee How, Chairman of CapitaLand China Trust Management Limited (CLCTML), the manager of CLCT, said: “China’s GDP grew by 5% in 2024, and five key provinces5 have set growth targets of 5% or higher for 2025. To support the economy, Chinese regulators have introduced measures to boost domestic demand and drive consumption, alongside more proactive fiscal and monetary policies. The government has also provided stimulus measures supporting high-tech manufacturing and advanced technology industries. With its multi-asset class portfolio, CLCT is well-positioned to benefit from these policy initiatives and China’s ongoing economic recovery.”
Mr Gerry Chan, CEO of CLCTML, the manager of CLCT, said: “Our retail portfolio achieved higher shopper traffic and tenant sales, led by our three malls post-AEI. With our strong track record of executing well-timed AEIs, CLCT will continue to extract value from our retail portfolio through asset rejuvenations and replacing traditional anchor tenants with trending retailers to enhance shopper experience and bolster income growth.”
“We navigated challenges in the logistics parks and business parks portfolio and maintained steady occupancy levels that have outperformed or are on par with market levels. We secured a master lease tenant for Shanghai Fengxian Logistics Park in December, which boosted the occupancy of our logistics parks portfolio to 97.6% as at 31 December 2024, up from 82.0% a year ago.”
“CLCT is well-positioned to capitalise on further interest rate reductions as the RMB rate easing cycle continues. This will effectively lower our overall cost of debt and enhance our natural hedging strategies. Besides proactively managing our capital structure, we will continue to identify opportunities to unlock value from our mature assets and optimise our portfolio. We continue to closely monitor developments in geopolitics and international trade, as well as the impact of the Chinese government’s economic support measures, as these factors will play a crucial role in shaping China’s ongoing recovery and CLCT’s performance,” added Mr Chan.
Mr Gerry Chan, CEO of CLCTML
CapitaMall Xuefu
Operating performance
As at 31 December 2024, CLCT’s retail portfolio occupancy remained stable at 98.2% compared to the same period in 2023. Majority of its retail assets recorded improved occupancy y-o-y, with CapitaMall Xizhimen achieving full occupancy and CapitaMall Nuohemule, CapitaMall Xuefu, and Rock Square registering more than 99% occupancy. Footfall across the retail portfolio for FY 2024 grew 8.7% y-o-y, marking consecutive y-o-y growth over the last four quarters. Tenant sales rose by 2.0% y-o-y despite lower consumer sentiment. The increase was primarily driven by the strong performance of the three malls that completed AEIs in 2023.
In 3Q 2024, CLCT completed the reconfiguration of 1,122 square metres at CapitaMall Xuefu, transforming the space into a unique and vibrant dining and retail street. CLCT has also begun the conversion of an older-format anchor supermarket space (8,800 square metres) at CapitaMall Wangjing into a new-concept supermarket, complemented by trending retail brands and popular F&B outlets to enhance the shopping experience.
The occupancy of CLCT’s business parks portfolio rose quarter-on-quarter to 87.6% as at 31 December 2024, above market levels despite the influx of supply. Occupancy of the logistics parks portfolio improved to 97.6% y-o-y, exceeding market performance of 75%6. Majority of its logistics parks recorded near-full or full occupancy, with Shanghai Fengxian Logistics Park and Kunshan Bacheng Logistics Park achieving 100% occupancy. CLCT will continue to prioritise the occupancy of its new economy assets and actively engage tenants to meet their needs.
Portfolio valuation
As at 31 December 2024, CLCT’s portfolio valuation declined 1.7% y-o-y, with capitalisation rates remaining largely unchanged7. Within the retail sector, smaller and weaker assets faced greater downside pressure while business parks and logistics parks were impacted by near-term supply-demand imbalances and a softer market outlook.
Capital management
CLCT continued to maintain a strong balance sheet with a well-staggered debt maturity profile and diversified sources of funding. As part of its proactive capital management strategy, CLCT secured refinancing for loans due in FY 2025. As at 31 December 2024, the average term to maturity of its borrowings was 3.4 years.
As at 31 December 2024, CLCT’s cost of debt stood at 3.51% per annum, supported by a healthy interest coverage ratio8 of 3.0 times. CLCT’s gearing stood at 41.9%, well below the regulatory limit of 50%. To mitigate exposure to interest rate movements and enhance stability, 76% of CLCT’s total debt is on fixed interest rates.
Sustainability initiatives
CLCT remains committed to making a positive environmental and social impact on the communities where it operates. In the 2024 GRESB Real Estate Assessment, CLCT was awarded a 5-star rating for the second consecutive year and scored an ‘A’ rating for Public Disclosure for the sixth year running. CLCT also increased its sustainable financing from 31% as at 31 December 2023 to 42% as at 31 December 2024.
During the year, CLCT obtained LEED Gold certification for two retail malls and two business park properties, bringing the proportion of green-certified assets in its portfolio to approximately 60%9 (FY 2023: 36%).
Summary of CLCT results
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1. Excluding contributions from CapitaMall Qibao which ceased operations in March 2023 and CapitaMall Shuangjing which was divested in January 2024.
2. The post-AEI malls are CapitaMall Yuhuating, Rock Square and CapitaMall Grand Canyon.
3. Including FX forward contracts, total RMB as % of total debt is approximately 38%.
4. In FY 2023, the foreign exchange gain mainly arose from the repayment of shareholder's loans principal.
5. Business Times, 15 January, China’s regions set bullish 2025 growth goal in guide for nation. The five regions have been defined as Beijing, Shanghai, Guangdong, Zhejiang and Fujian.
6. Colliers Independent Market Research Report, 4Q 2024.
7. Excluding assets with a change in valuation service providers.
8. The ratio is calculated by dividing the trailing 12 months EBITDA over the trailing 12 months’ interest expense (exclude finance lease interest expenses under FRS 116), borrowing-related fees and distributions on hybrid securities (i.e. perpetual securities) in accordance with revised MAS guidelines with effect from 28 November 2024.
9. Refers to CLCT properties managed by CapitaLand Investment (by sq m).
