SINGAPORE -- Singapore's CapitaLand, one of Asia's largest real estate companies, announced on Monday a plan to split into two units, with one focused on investment management and the other on property development.
Listed on the Singapore Exchange, CapitaLand is backed by Temasek, a state investor. Its real estate investment trusts, investment management and lodging units will be run by a new entity: CapitaLand Investment Management (CLIM).
Its real estate development business is meanwhile to be privatized under CLA Real Estate Holdings, an indirect, wholly-owned unit of Temasek.
CLA already has the majority stake in CapitaLand with 51.09% of shares as of August 2020.
CapitaLand is known for its massive shopping malls in Singapore and China. It said the restructuring is intended to keep its investment activities asset-light. With the company's property development arm under CLA, CLIM will focus on growth in assets under management and on capital efficiency.
Lee Chee Koon, CapitaLand's group chief executive, said at a briefing on Monday that the decision to make property development a private business is that the long gestation periods involved require "patient capital."
"By organizing in these two different ways, you'll get the right level of capital to support the growth of the two different businesses," said Lee.
With assets under management of about 115 billion Singapore dollars ($85.7 billion), CLIM's public listing will make it the largest real estate investment manager in Asia.
"It fits in terms of the longer-term strategic objective," said Lee. "We say we wanted to be a developer-asset manager -- that doesn't change. One is going to be done in a privately-held entity, one is going to be done in a listed entity."
CapitaLand plans for CLIM to hold on to funds across multiple asset classes that span private and listed sources. The managers of all listed real estate investment trusts and business trusts, as well as selected unlisted funds managed by CapitaLand, will be held under the new unit with the reorganization.
These funds had a total value of about SG$78 billion in December last year, and had grown at a compounded annual growth rate of around 15% since 2017, the company said. CLIM's investment management business will be global, it said, and will focus on fee-related earnings as well as expansion of fund size.
"It helps to sharpen the focus," said Lee, who will be CLIM's chief executive. "Being on the listed side, we can be very, very disciplined in terms of deploying capital... in creation of fee income."
Ascott, the company's lodging management unit, which operates serviced residences in countries like Japan, Indonesia, India and South Korea, will come under CLIM.
With property development privatized under CLA, CapitaLand will retain 52% of the shares after CLIM's listing.
After the restructuring, CLA will be left with real estate development-related business and assets worth about SG$6.1 billion.
"This restructuring will play a key role in setting CLIM on a focused and high growth trajectory," said Wong Kan Seng, CLA's chairman. "It will also provide flexibility for the development business to pursue longer gestation and capital-intensive projects."
The proposed restructuring still has to be approved by Singapore's High Court, by CapitaLand's independent shareholders at an extraordinary general meeting, and at a scheme meeting expected to be held around the third quarter of the year. If all goes to plan, the reorganization should be completed in the final quarter of 2021.
Like many Asian real estate companies, CapitaLand had a tough 2020 with the uncertain operating environment the COVID-19 pandemic created for property.
It posted a SG$1.57 billion loss for the year, a drastic plunge from its SG$2.14 billion profit in 2019.
CapitaLand has a presence in over 230 cities across more than 30 countries. Some 37% of its assets under management worth SG$43 billion are in the likes of retail, commercial and residential space in China. Its second largest portfolio is in Singapore -- making up 34% of the total and worth SG$39 billion.
"The majority of our capital is exposed to Singapore and China," Lee said during the briefing. "With the vaccination rollout, my own sense is that the worst of COVID-19 is behind us, and we should be in a phase of recovery."
"That's why we also think that it is right to accelerate our transformation, and time to propose this restructuring exercise."