SOUTH-EAST Asia’s largest developer, CapitaLand, is set to stage a giant US$2.2 billion (S$3 billion) acquisition of Hong Kong property investment holding company Orient Overseas Developments Limited (OODL).
CapitaLand China Holdings (CCH) – a wholly owned subsidiary of CapitaLand Limited – announced yesterday that it had signed an agreement to buy OODL from Hong Kong-listed container line Orient Overseas International Limited (OOIL), controlled by the family of former Hong Kong chief executive Tung Chee Hwa.
The deal – set to be completed by the end of the first quarter – will boost CapitaLand’s real estate business with a portfolio of seven sites in Shanghai, Kunshan and Tianjin boasting a total gross floor area of 1.48 million sq m.
Some 87 per cent of that is in Greater Shanghai, while the remaining is in the Tianjin city centre.
Residential area constitutes the largest component – 56 per cent – while offices, serviced apartments and hotels, and retail make up 19 per cent, 17 per cent and 8 per cent respectively, according to CapitaLand.
The purchase will, at a stroke, double the firm’s China property portfolio from 1.4 million sq m to 2.8 million sq m, and increase CapitaLand’s assets in China to approximately 36 per cent.
CapitaLand group chairman Richard Hu said the proposed acquisition was timely and provided an excellent strategic fit.
‘It also fits into our stated goal of growing our asset size in China from the present 28 per cent of total assets to 45 per cent over the next five years, as we remain very confident of the long-term future of the country,’ he said.
The developer will fund the acquisition from internal cash resources, much of which have been generated by the initial public offering of CapitaMalls Asia, which raised $2.8 billion in November. CapitaLand will assume responsibility for a US$1.05 billion shareholder loan owed by OODL to its parent.
CapitaLand president and chief executive Liew Mun Leong said the acquisition, which is still subject to OOIL shareholder approval, represented an ‘opportunistic’ investment.
As most of the sites already have planning and land-use approval, and some have construction permits in place, red tape is reduced and developments can be released quicker to the market.
‘In Shanghai, demand far exceeds supply, and the competition for land at good price levels is tough. With one go, we have solved a few years of land acquisition problems,’ Mr Liew said.
He is bullish about demand, citing Shanghai’s position as a financial centre and its status as a main shipping hub as key engines of growth, while CapitaLand China executive committee deputy chairman Lim Ming Yan said urbanisation would help keep demand high.
DMG & Partners Securities analyst Brandon Lee said the acquisition was likely to be a positive move for CapitaLand in the medium to long term.
‘Some of CapitaLand’s developments have been in lower tier cities so far. This will really allow it to expand its footprint – especially in Shanghai and Tianjin – which are good growing cities in property development,’ he said.
Hong Kong’s OOIL said yesterday it expected to book a profit of US$1.06 billion from its China property sale to Singapore’s CapitaLand.
The transaction represented an opportunity for the group to redirect capital to its core business of container transport and logistics services, it said in a statement released yesterday.
A slump in global trade and excessive capacity in the shipping industry led to a loss of US$231.8 million in the half-year to June 30 – its first in a decade.
Source: Straits Times, 19 Jan 2010
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