CapitaLand cashes in on retail property sector
By Dai Yan (China Daily)
Updated: 2004-12-24 08:47

Singapore's CapitaLand, Southeast Asia's largest property firm, is investing nearly US$120 million to cash in on China's prospering retail property.

Through its indirectly wholly-owned subsidiary CapitaRetail China Investments Pte Ltd, CapitaLand signed a co-operative agreement with Shenzhen International Trust & Investment Co Ltd (SZITIC) to enter into two joint ventures to acquire and manage a portfolio of retail malls in China, said a news release sent by the company to China Daily.

The SZITIC, a State-owned trust and investment firm, owns a 35 per cent share in Wal-Mart operations in parts of China.

The two sides will have joint investment into project companies to develop retail malls, which will be anchored by the Wal-Mart chain of Supercentres, the company said.

For the first batch, CapitaLand has entered into six projects being developed by SZITIC. CapitaLand will take a 51 per cent stake in these projects, which need an investment about 983.88 million yuan (US$119 million).

The six mall projects are expected to become operational from mid-2005 to early-2006 and each will have a floor area of between 40,000 and 70,000 square metres.

The company expected these malls to generate a property yield of more than 9 per cent.

In addition to the six developments, CapitaLand and SZITIC will also develop a further 14 retail malls worth about US$512 million within a year, comprising an estimated total floor area of 700,000 square metres.

CapitaLand is also granted the first right to acquire a majority of the retail malls to be anchored by Wal-Mart which the SZITIC may propose to develop after January 2005.

Wal-Mart, which operates 38 stores in 18 Chinese cities, is targeting to open 20 to 30 Supercentres in China in the coming four years.

Analysts said they believed the investment of CapitaLand is to ride the fast expansion of retail malls.

Xu Xiaofang, an analyst from Guotai & Jun'an Securities, said foreign investment in retail business will enter quick expansion after most restrictions were lifted from December 11 this year.

China has announced the removal of restrictions on foreign investors' shares in commercial business and the stores' locations.

"Many foreign retailers are prepared to invest more as they are allowed to set up wholly-owned retail business," Xu said.

Xu said he expected foreign retailers will open more stores in second-tier cities in China's middle and western regions, and these regions will need more retail properties.

Xu predicted retail sales by foreign-funded companies will account for 7 per cent of China's total retail sales in three years.

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