$CapitaLand (C31.SG) $Trading rose 21 per cent to S $3.99 in early trading on March 23 after the group announced a strategic restructuring of two different real estate businesses, fund management and property development.The transaction (pending approval) will be conducted through an arrangement plan that provides an implied consideration of S $4.102 to Cade Group shareholders, including:
69% of the S $4.102 will be paid in the form of CapitaLand Investment Management shares
23% of the S $4.102 will be paid in cash
8% of the S $4.102 will be paid in CapitaLand Integrated Commercial Trust units
Eligible shareholders are expected to receive S $4.102 in cash and shares per Cade share. Before the announcement, the stock traded at S $3.31.
The strategic restructuring of the listed entities of the Cade Group is in line with the objectives of Cade 3.0.The group has repeatedly reiterated in recent years that Cade 3.0 aims to "create long-term shareholder value through a sustainable return on equity that is higher than the cost of equity". As early as in early 2019, the group pointed out in the deals related to the Starbridge take-off Group that one of the four key goals at that time was to accelerate revenue growth by further developing the asset management business and transforming it into a global real estate asset management company.
Recently, with the announcement of the results for fiscal year 2020, Li Zhiqin, CEO of Cade Group, pointed out that although the COVID-19 epidemic interfered with Cade's plan to become a globally competitive asset management company and real estate company, it will not change this plan. He added that the group would continue to seize new opportunities to further promote business transformation. Lin Zhuobin, chief financial officer of the Cade Group, also pointed out at the online meeting of the financial year 2020 that Cade's fund management business was a key pillar, and in a challenging environment, the size of fund assets under management increased by 5.3 per cent year-on-year in fiscal 2020.
Mr Lin added that the group was still on track to achieve S $100 billion in fund asset management, a goal that was within reach and was optimistic about further growth in asset management, both from a balance sheet and an operational perspective. Lin Zhuobin also inferred that the strategic restructuring of the real estate investment trust (REIT) business in the past two years has laid the foundation for the group to become a global real estate asset management company.
In recent years, the securitization of real estate assets around the world has also developed so rapidly that large index providers and global institutions that classify stocks have established real estate as one of the independent sectors, which is different from its own sub-industry, rather than as a sub-sector of financial services. According to the data available by 2020, this strategic restructuring may make the new entity Cade Investment Management the largest listed real estate investment management company in the Asia-Pacific region with assets under management. and one of the top three real estate investment management companies in the world.
Cade Investment Management ("CLIM")
The new entity Cade Investment Management will be a fully integrated real estate investment management company.With fund and real estate management capabilities (management companies for all REITs and business trusts), in addition, CapitaLand Development will be a furniture flexible private entity company in terms of private equity and public funds to implement large capital scale, multi-stage intensive projects and long-gestation projects, and to incubate new businesses such as data centers.
The strategic restructuring of Cade Group aims to create more value for shareholders by listing highly capital-efficient investment management business and privatizing capital-intensive development business.The business of developers and investment management companies is very different, and there are also differences in industry goals. Real estate developers are usually committed to creation or redevelopment, and in some cases, large projects can span the real estate market cycle, while real estate investment management companies are responsible for developed real estate and manage it in the most efficient way to generate revenue. Real estate management companies in the Asia-Pacific region currently maintain valuations higher than those of developers:
Real estate managers in the Asia-Pacific region currently trade at a median book value discount of 10 per cent, higher than the 15 per cent discount at the end of 2019 and at a price-to-earnings ratio of 16 times earnings at a less relevant price-to-earnings ratio, up from 15 times earnings at the end of 2019.
Property developers in the Asia-Pacific region are currently trading at a 25 per cent discount on book value, the same as the deal discount at the end of 2019. They trade at 11 times earnings, up from 10 times at the end of 2019.
It is worth noting that the above indicative comparison includes not only the same industry in the region, but also management companies and developers of different sizes.
In terms of net asset value, Li Zhiqin pointed out on March 22 that the trading price of listed real estate investment management companies in the capital market is usually higher than their net asset value.
According to the financial data on December 31st, the amount of assets under management of Cade Investment Management will reach about S $115 billion.It has become the largest real estate investment management company in Asia
S $78 billion of the assets under management comes from fund management, including the management companies of all listed real estate investment trusts ((REITs)) and business trusts, as well as some of the unlisted funds currently managed by Cade.
S $28 billion of the asset management scale comes from a full range of accommodation management businesses, including the Yashi Pavilion serviced residential management platform. As Cade points out, Estee is a leading international hotel owner and hotel operator with a portfolio in more than 30 countries around the world. So far, it has about 70000 operating units and nearly 53000 units under development, with a total of about 123000 units in more than 770 properties.
S $10 billion of the asset management scale comes from high-quality income-generating investment properties.
The deal is pending approval and is expected to close in the last quarter of 2021. The strength of Cade's diversified portfolio and the full value chain of real estate will continue to be its advantage, with a number of asset cycling projects carried out in the past two years.
Market participants will also be concerned about the future impact of FTSE Russell on the Straits Times Index and the applicability of Article 7.4 of the merger, restructuring and complex M & A guidelines.
Cade Group-an important Cornerstone of Singapore Stock Market
The Cade Group is an important cornerstone of the Singapore stock market, with six listed stocks (including the Cade Group, three REITs, one business trust and one bound trust), accounting for 9 per cent (S $130 million) of the average daily turnover of the Singapore stock market this year. In the first 11 weeks of 2021, the average total return of the six stocks was 4 per cent, similar to the median total return of 3 per cent for all listed REITs in the Asia-Pacific region. Cade Group listed its first REIT on the Singapore Stock Exchange in 2002.
Cade's five Singapore-listed trusts rose 4 per cent in the year to March 22, 2021, with an average 10-year total return of 145 per cent (assuming dividends were reinvested).
Source: SGX, Luft, Bloomberg (data as of March 22, 2021)
The company's financial rate of return. Note: asset-liability ratio as of February 28, 2021, Cade Commercial Malaysia Trust is not included in the table.
Cade Group is one of the largest diversified real estate groups in Asia, headquartered in Singapore and listed in Singapore. As of December 31, 2020, the Group owns and manages a global portfolio worth approximately S $132.5 billion. The Cade Group started trading on the main board of the Singapore Exchange on November 21, 2000, and the former DBS Group subsidiary Development Land (DBS Land) was delisted on the same day. Prior to this, a special general meeting of shareholders was held in October 2000, and major shareholders voted in favor of the merger of Development Land and Baiteng Land (Pidemco Land, Xinke Group to form the Cade Group, which is expected to become the largest listed real estate company in Southeast Asia.
Source: SGX SGX