CapitaLand, on March 22, has announced a scheme of arrangement with CLA Real Estate Holdings.

Through the arrangement, CapitaLand will effect a proposed restructuring of the group’s business to consolidate its investment management platforms, as well as its lodging business into CapitaLand Investment Management (CLIM), which will be listed on the Singapore Exchange (SGX).

The scheme will also place the real estate development business of the group under private ownership to be fully held by CLA through the proposed privatisation of CapitaLand on completion of the scheme.

CLIM is expected to be the largest real estate investment manager (REIM) in Asia and the third-largest REIM globally, with assets under management (AUM) of about $115 billion. The amount represents the total value of real estate managed by the CapitaLand Group.

The privatised development entity will develop and incubate projects as a key source of pipeline for CLIM.

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As part of the proposed scheme, CapitaLand will distribute about 48% of shares in CLIM to all its shareholders, excluding CLA.

The 1-for-1 distribution means the share ownership ratio in CLIM immediately after the issuance of CLIM shares will be equal to the shareholders’ existing ownership in CapitaLand.

CapitaLand will continue to own 52% interest in CLIM upon its listing. It will also distribute 388.2 million units (or 6%) in CapitaLand Integrated Commercial Trust (CICT), bringing its 28.9% stake in the REIT to 22.9%.

CLA will not participate in the distribution of CICT units. Its entitlement to the CICT units will be distributed to the eligible shareholders as part of the scheme.

Under the scheme, the total implied consideration for each CapitaLand share held by shareholders is at $4.102 per share based on current share capital.

On a fully diluted share capital basis, the implied consideration stands at $3.969 per share.

Eligible shareholders are expected to receive $4.102 per share in cash and scrip for every one CapitaLand share they own. This is 24% above the last traded price of CapitaLand and represents a 27% premium to the one-month volume weighted average price (VWAP).

The cash consideration will not be reduced by CapitaLand’s final dividend for the FY2020 after the dividend is paid out.

CLIM will be a fully integrated REIM with funds and property management capabilities across multiple asset classes, as well as private and listed funds.

Managers of all the listed REITs and business trusts, as well as selected unlisted funds currently managed by CapitaLand will also be under CLIM.

The funds have a total AUM of $78 billion as at Dec 31, 2020.

The Ascott Limited, CapitaLand’s lodging management business, will also become a part of CLIM.

The remaining real estate development-related business and assets under CapitaLand with a pro forma net asset value (NAV) of about $6.1 billion will be held privately by CLA.

“Significant progress has been made in the last few years to pivot CapitaLand from a largely traditional development-focused business to one that is more asset-light and fee-income driven,” says Ng Kee Choe, chairman of CapitaLand.

“This proposed restructuring is a significant and important milestone in CapitaLand’s transformation. It will provide the impetus for us to further expand and scale up our asset and investment management, and lodging businesses whilst benefitting from the pipeline of projects from CapitaLand as part of the ecosystem.”

“It will also extend our market leadership in the Asian real estate investment management business. Shareholders will get an opportunity to remain invested in these asset-light growth businesses through CLIM. At the same time, shareholders will benefit from the substantial value that will be unlocked,” adds Ng.

“As one of Asia’s largest diversified real estate groups, this restructuring will play a key role in setting CLIM on a focused and high growth trajectory. It will also provide flexibility for the development business to pursue longer gestation and capital-intensive projects. As a major shareholder of CLIM upon completion of the proposed transaction, the privatised CapitaLand and its development arm will support the growth of CLIM as a committed development partner, and by contributing a pipeline of assets that the privatised CapitaLand will incubate. Both entities will have substantial cross-platform synergies and complementary strengths to seize growth opportunities in the market,” says Wong Kan Seng, chairman of CLA.

“The real estate development business is subject to longer gestation periods and not adequately appreciated by the public markets. With a privately held development business, we will be able to better ride property development cycles to optimise returns across asset classes and geographies. We can make more appropriate risk-return decisions to undertake attractive but longer gestation projects, and optimally build our pipeline and incubate projects,” says Lee Chee Koon, group CEO of CapitaLand.

“With the privatised development arm as a key source of pipeline for CLIM, the well-established CapitaLand ecosystem remains intact. This symbiotic relationship within the group will be a major advantage for CLIM and differentiate it from other real estate investment managers,” he adds.

Lee will be helming CLIM as group CEO.

Jason Leow, currently President, Singapore & International of CapitaLand Group will be the CEO of CapitaLand Development.

Shares in CapitaLand last closed flat at $3.31 on March 19, before its trading halt on the morning of March 22.