SINGAPORE (Jan 18): CapitaLand’s acquisition of two subsidiaries of Ascendas-Singbridge (ASB) is a pretty sweet deal for Temasek.
The Singaporean state investment arm is enlarging its stake in CapitaLand – specifically from 40.8% to about 51% – at a time when shares in the integrated property developer are trading at depressed levels.
With the ASB units under its belly, CapitaLand could be in a stronger position to grow to become Asia’s largest, and among the top 10 global investment managers by real estate assets under management.
But that has implications for Singapore’s national coffers.
In 2016, Temasek was included under the so-called Net Investment Returns framework, which allows the government to spend up to half of its expected long-term returns.
The NIR framework was implemented in FY2009 to allow the government to spend up to half of the expected long-term real returns on its net assets managed by GIC and the Monetary Authority of Singapore (MAS). It was a major change from the previous Net Investment Income framework, under which the government could spend only investment income comprising dividends and interest.
The government introduced the NIR framework to enhance revenues and ensure a fair balance between the needs of current and future generations.
This was in anticipation of significantly higher public spending needs, especially as Singapore’s population ages and its economy copes with significant changes.
For FY2018, NIR contribution from Temasek, GIC and MAS is budgeted to top $15.85 billion, up 8.5% y-o-y. Total expenditure for the year is budgeted to rise 8.3% to $80.03 billion. An overall deficit of $600 million is expected for FY2018, which ends on March 31, 2019. Singapore recorded an overall budget surplus of $9.61 billion for FY2017.
With investment returns now such a significant contributor to Singapore’s national budget, will Temasek push harder to unlock value from its holdings? And, will minority investors be treated fairly in these corporate deals?