CapitaLand has sold stakes in five business parks and a retail mall in China for RMB4.94bn (€631m) into what will become Singapore’s largest China-focused listed trust.

The assets are being sold to CapitaLand Retail China Trust (CRCT) in a deal which will reposition CRCT from a retail vehicle to a diversified trust.

CapitaLand said the five business parks are located in Suzhou, Hanghou and Xian. The trust also acquired a 49% in a retail asset, Rock Square, in Guangzhou. CRCT currently owns 51% of the retail mall.

Tan Tze Wooi, CEO of the trust’s manager, CapitaLand Retail China Trust Management, said the acquisition was the largest to date for CRCT.

Tan told analysts: “The philosophy is to build up a multi-asset-class diversified portfolio over time.

“With the widening of our mandate, we are now able to avail ourselves to more opportunities. We can look at different assets at different time points, and have the flexibility to combine different asset classes to bring them on-board.”

Tan noted that the acquisition would give the vehicle better geographical diversification within China, reducing exposure to Beijing and entering the higher-growth cities of Suzhou, Xi’an and Hangzhou.

He said the importance for CRCT was to use this transaction to scale itself to what he called “the right level”, where it would be in a position to acquire “chunky integrated developments”.

“We want to position ourselves for long-term China play,” he said. “If you look at China and the opportunities available to us, we are currently 100% retail-centric. Post-acquisition, we will be 80% retail and 20% industrial.”

Tan told analysts that the trust was keen to broaden its exposure to the “new economy” sector of logistics, data centres and financial services. It would look to acquire assets developed in-house by the CapitaLand group, or from external sources.

Over the longer term, he envisaged CRCT’s asset allocation to evolve, to include 40% large integrated developments, 30% retail and 30% industrial/business parks.

“CRCT will become the dedicated S-REIT for the (CapitaLand) group’s China business, with growth visibility via a pipeline of the full spectrum of China assets,” Tan said. “It will be well-positioned to capture China’s next growth phase.”

Following settlement, CRCT’s assets under management will rise by 28.5% to about S$4.5bn.

The proposed acquisition, subject approval of CRCT’s independent unitholders, is expected to be completed by the first quarter of next year.

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