CapitaLand China malls post solid growth

3 min readUpdated Aug 3, 2015Aug 3, 20155:00 AM

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CapitaLand is making the most of China’s retail sales growth, its mall portfolio posting growth of 6.1 per cent in net property income.

In results released this morning, CapitaLand Retail China Trust Management Limited (CRCTML), the manager of CapitaLand Retail China Trust (CRCT), announced distributable income of S$45.1 million for the first half of this year, an increase of 10.3 per cent over the S$40.9 million for the same period last year – a percentage rate coincidentally matching China’s 2015 retail sales growth.

CRCT owns 10 quality shopping malls six Chinese cities: CapitaMall Xizhimen, CapitaMall Wangjing, CapitaMall Grand Canyon, CapitaMall Shuangjing and CapitaMall Anzhen in Beijing; CapitaMall Qibao in Shanghai; CapitaMall Erqi in Zhengzhou, Henan Province; CapitaMall Saihan in Huhhot, Inner Mongolia; CapitaMall Wuhu in Wuhu, Anhui Province; and CapitaMall Minzhongleyuan in Wuhan, Hubei Province. As at 30 June 2015, the total asset size of CRCT is approximately S$2.5 billion.

Tony Tan, CRCTML CEO, said the portfolio of malls ended the period 95 per cent leased and achieved 6.1 per cent growth in net property income. Rental reversions of 4.6 per cent (excluding CapitaMall Minzhongleyuan, which reopened in May last year after refurbishment).

“Tenants’ sales at our multi-tenanted malls increased 17.8 per cent year on year, while shopper traffic grew two per cent.

“As part of our proactive mall management strategy to keep abreast of the latest retail trends, we continue to upgrade and refresh the tenant mix at our malls. CapitaMall Xizhimen enriched its F&B offerings on Level 1 with a popular restaurant Bellagio.

“Tony Tan, CRCTML CEO, said the portfolio of malls ended the period 95 per cent leased and achieved 6.1 per cent growth in net property income.”

“CapitaMall Wangjing signed popular international brands including Tommy Hilfiger and New Balance, while key tenant Le-Wellness Gym reopened after renovations with improved facilities and an enhanced image that strengthened CapitaMall Wangjing’s position as a one-stop family and lifestyle mall in the affluent Wangjing District.

“CapitaMall Grand Canyon continued to enhance its fashion and beauty offerings by bringing in well-known brands such as British fast-fashion retailer New Look; and Korean cosmetic and skincare brands Etude House and Innisfree.

“At CapitaMall Qibao, we reconfigured the space formerly occupied by a gym tenant on Level 3 and brought in Rucker Park to maximise the outdoor space for popular sporting activities such as street soccer, basketball and badminton.

“At CapitaMall Saihan, we strengthened the sports brand offerings with Nike, New Balance and Fila, which helped to diversify the mall’s overall fashion offerings. We will continue to optimise the retail mix in our malls and increase their appeal to shoppers to further enhance unitholder value, while continuing to be on the lookout for suitable acquisition opportunities to drive our next phase of growth.”

Victor Liew, CRCTML chairman, said in the first half of 2015, China’s economy surpassed expectations and expanded seven per cent year on year, while the country’s retail sales grew 10.4 per cent year on year to RMB14.2 trillion.

“Notably, consumption accounted for a record 60 per cent of China’s Gross Domestic Product in the first half of the year. As the Chinese government has identified domestic consumption as a key driver of economic growth, this should augur well for our malls.”

All the CRCT malls in the portfolio are positioned as one-stop family-oriented shopping, dining and entertainment destinations for sizeable population catchment areas. A significant portion of the properties’ tenancies consists of major international and domestic retailers such as Beijing Hualian Group and Carrefour under master leases or long-term leases. Anchor tenants are complemented by popular specialty brands such as KFC, Paris Baguette, Pizza Hut, Sephora, Uniqlo, Vero Moda, Watsons and Zara.

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What this means

CapitaLand's strategy of refreshing tenant mixes with international brands and F&B, much like Panpuri's planned China expansion, is clearly paying off, leading to robust income and rental growth. This proactive management mitigates risks seen with store closures like Louis Vuitton's Guiyang exit, demonstrating resilience in a dynamic market. The focus on family-oriented, experiential retail places pressure on competitors relying solely on traditional anchors. CapitaLand’s success contrasts with JD.com’s acquisition hurdles, showing the value of established physical assets in China. This move is likely to work well, given its alignment with China’s domestic consumption drive. Look for CapitaLand's next acquisition announcement to gauge its expansion pace.

Maria Santos · Retail News Asia newsroom

Questions & Answers

Which of CapitaLand's malls in China underwent refurbishment last year?

CapitaMall Minzhongleyuan in Wuhan, Hubei Province, reopened in May last year after refurbishment. Rental reversions of 4.6 per cent were achieved excluding this mall.

What was the total value of CapitaLand Retail China Trust's assets as of June 2015?

As of 30 June 2015, the total asset size of CapitaLand Retail China Trust was approximately S$2.5 billion. This includes its portfolio of 10 shopping malls across six Chinese cities.

How did CapitaLand's tenant sales and shopper traffic perform across its multi-tenanted malls?

Tenants’ sales at CapitaLand's multi-tenanted malls increased by 17.8 per cent year on year. Shopper traffic also saw growth, rising by two per cent over the same period.

What percentage of China's GDP did consumption account for in the first half of 2015?

Consumption accounted for a record 60 per cent of China’s Gross Domestic Product in the first half of 2015. This was highlighted as a key driver of economic growth by the Chinese government.

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