CRCT – BT

CRCT seeks approval to retain Beijing mall, raise up to $280m

CAPITARETAIL China Trust (CRCT) wants approval from unitholders to keep its main income generator Wangjing Mall for another six months and to raise equity of up to $280 million to help acquire Xizhimen Mall. Both malls are in Beijing.

CRCT does not have legal title to Wangjing Mall – only contractual rights to the property. Legal title is still pending formal approval from the Chinese authorities. If this is not obtained within 12 months of CRCT’s Dec 8, 2006 listing date, the trust needs the nod from unitholders to retain the mall in its portfolio for another six months.

Wangjing Mall, which is almost fully let, is projected to contribute 33.2 per cent of the distribution per unit (DPU) from CRCT’s enlarged portfolio, including Xizhimen Mall, for the year ending Dec 31, 2008.

The forthcoming $336 million acquisition of Xizhimen Mall will boost CRCT’s portfolio to eight malls worth almost $1.2 billion and take the trust closer to its target asset size of $3 billion by 2009. The acquisition will boost projected FY2008 DPU 10.3 per cent to 7.2 cents, assuming the new issue is priced at $2.50 a unit.

The equity fund-raising exercise will involve the issue of 112 million new units for offer and placement to existing unitholders and new institutional and retail investors.

Assuming CapitaLand and CapitaMall Trust, which each own 20 per cent in CRCT, subscribe for the new units to maintain their existing stakes in CRCT, $168 million will need to be raised from other parties, making the equity fund-raising exercise ‘highly palatable’, Hsuan Owyang, chairman of CapitaRetail China Trust Management, said in a statement yesterday.

Besides the equity fund-raising exercise, CRCT will seek additional borrowings of about $88 million. The balance of the proceeds beyond the $344 million total acquisition cost of Xizhimen Mall, including related fees and expenses, will be used for working capital and capital expenditure. CRCT’s aggregate leverage will drop from 31 per cent to 28.7 per cent, giving it flexibility to undertake future acquisitions and asset enhancements.

An extraordinary general meeting to obtain untiholders’ approval will be held on Dec 4, 2007 and the proposed equity fund-raising exercise will be carried out no later than January 2008.

CRCT is buying the seven-storey Xizhimen Mall, which officially opened in September this year, from CapitaRetail China Incubator Fund.

The proposed acquisition includes an agreement to buy a planned extension to the mall’s basement 1 from Beijing Finance Street Construction Development Co, the original developer of the Xihuan Plaza complex where the mall is located.