CapitaLand Sets Up $1.4b Raffles City China Fund

Source : The Business Times, July 17, 2008

Fund will invest in prime mixed-use commercial assets in key gateway cities

CAPITALAND has set up a $1.4 billion Raffles City China Fund (RCCF) to invest in prime mixed-use commercial properties in key Chinese gateway cities.

Raffles City Shanghai: The new fund - RCCF - will purchase CapitaLand's 55.9% stake in the project which opened in 2003. It will also buy 100% of the Raffles City projects in Beijing, Chengdu and Hangzhou

The fund's seed assets will be the property group's Raffles City-branded developments in China.

RCCF is CapitaLand's first integrated development private equity fund in China, and is also the largest originated and managed by the group to date.

CapitaLand has subscribed for a 50 per cent sponsor stake in RCCF. Leading financial institutions and pension funds from Asia, Europe and North America took up the remaining interest. RCCF has the option of a final closing by end-December and could grow to $1.8 billion.

CapitaLand may reduce its stake in the fund to 45 per cent if there is strong investor demand for the option.

Through its indirect wholly owned subsidiary RCCF Management, CapitaLand will also undertake the role of fund manager and manage RCCF-owned properties.

The fund will purchase CapitaLand's 55.9 per cent stake in Raffles City Shanghai, which opened its doors in November 2003. It will also purchase 100 per cent of Raffles City Beijing, Raffles City Chengdu and Raffles City Hangzhou.

The three are under various stages of development and will be ready between 2009 and 2012.

'Currently, the assets are valued at a total of about US$2 billion (about S$2.7 billion) comprising CapitaLand's stake in Raffles City Shanghai and the three Raffles City projects on a completed basis,' said CapitaLand.

Funds raised will be substantially invested with the acquisition of these four assets.

'The strong investor response to the fund is an endorsement of our expertise and delivery track record in the entire real estate value chain,' said CapitaLand's president and CEO Liew Mun Leong.

'The successful close of the fund is a boost for our expansion plans for Raffles City to achieve the eventual goal of 10 such iconic developments globally.'

RCCF is CapitaLand's eighth real estate private equity fund in China.

'We will continue to develop unique real estate products to cater to an increasingly sophisticated consumer market and establish new real estate funds for investors who share our confidence in China's growth,' said Lim Ming Yan, CEO of CapitaLand China Holdings Group and CapitaLand Financial Limited (China Development).

Co-head of Asian real estate research at UBS, Alastair Gillespie, sees benefits for CapitaLand in setting up RCCF. Not only would the fund free up capital for the property group to pursue new opportunities in China, it would boost market confidence in the company's ability to grow its fund management business.

CapitaLand shares fell six cents to close at $5.54 yesterday.