In November this year, CapitaLand will reach its 10-year milestone since its formation from the merger of Pidemco Land and DBS Land in 2000. Despite the difficult start where it found itself in the perfect storm of the 9/11 attacks, dot-com bust, SARS, war in Iraq and Bali bombing, the Singapore-listed real estate company has grown into Asia’s pre-eminent property business, with a business model that has withstood several crises and still thrived.
Today, the once Singapore-centric developer is an international player active across the real estate segment and value chain. It has presence in more than 110 cities in over 20 countries; it has established businesses in homes, offices, shopping malls, serviced residences and integrated developments; and it has built more than 20,000 homes, manages over 60 shopping malls and operates more than 26,000 serviced residence units.
Meanwhile, its financial structure has been growing from strength to strength with a net gearing ratio of just 0.28x in 1H2010 compared to 0.92x in FY2000. One key factor behind this is CapitaLand’s unique capital recycling model where emphasis is on capital productivity. With this focus, CapitaLand pioneered the Singapore REIT market and has provided many of its success stories, including CapitaMall Trust, CapitaRetail China Trust, CapitaCommercial Trust and Ascott Residence Trust. In total, CapitaLand has six listed REITs of which four are listed on the Singapore Stock Exchange and two on Bursa Malaysia. The platform enables CapitaLand to spin off many of its top-quality mature real estate assets into its sponsored REITs, releasing capital to pursue development projects in the fast growing Asian markets. This strategy has allowed the Group to double its asset base to S$60bn from S$27bn while the combined market value of the listed companies and REITs has quadrupled to S$42bn over the past 10 years.
Another less quantifiable but nonetheless important driver is the Group’s emphasis on transparency and governance. To CapitaLand, these are the cornerstones of liquidity and cost of capital. Transparency and governance are thus not merely regulatory boxes to tick, but are strategically important. Global investors trust CapitaLand to be the custodian of their investment capital and this trust should be treated with respect. Some of the initiatives that CapitaLand has undertaken in recent years include quarterly financial reporting (before it became mandatory) and always embracing prompt and thorough disclosures along international standards. A proactive approach is adopted in disseminating information and channels include not only the Singapore media but international media. CapitaLand has also been early adopters of web based technology such as webcasts, RSS feeds and auto email alerts.
Communication with stakeholders is high on CapitaLand’s agenda. Aside from timely and comprehensive disclosures, the Group strives to maintain a high level of investor access through face-to-face meetings, teleconferences, investor conferences, roadshows and site visits. Since 2009, CapitaLand met with over 1,000 investors globally and participated in investor conferences and roadshows in Singapore, Hong Kong, Shanghai, Beijing, London, Frankfurt, Zurich, New York, Boston, Denver and San Francisco.
Key stakeholder communications
Stakeholders’ education: To help investors and analysts better understand its businesses and strategic approach, CapitaLand stepped up our one-on-one discussion sessions and created data summary templates to provide more clarity and transparency.
Meeting with management: Events are organised to enable investors and analysts to engage with senior management, including forums with business units’ CEOs and the Group CFO.
Retail investors: CapitaLand has been committing more time and resources to cater to this growing pool of investors. The Group participates in retail investor conventions to cater to the needs of the investment public.
Adoption of technology: The web space is a highly efficient channel to dispense news and reference library of corporate information. Much effort has been put into the creation of CapitaLand’s website, including the adoption of automated email pushes and RSS feeds.
The trust garnered from the practice of good governance and transparency has been part of the reason behind the Group’s ability to grow the business over the past 10 years. During the recent global economic crisis, CapitaLand did not encounter any major funding challenges as the investment community understands the Group well and is confident that it will continue to maintain a proactive and disciplined approach in its business and capital management. In February 2009, CapitaLand raised S$1.8bn through a pre-emptive rights offering. This was done to increase financial flexibility should the downturn be protracted and to take advantage of opportunities that might arise. The rights issue was well-received, achieving a subscription rate of 1.22 times. More importantly, the shares were re-rated and began an upward trajectory from the date of the rights announcement.
Almost immediately, CapitaLand completed a seven year S$1.2bn convertible bond which was the largest and longest tenor convertible bond for an Asian listed issuer then, confirming its good standing in the capital markets. With the substantial liquidity, the Group deleveraged its major REITs and allocated S$1bn in capital to expand their China, Vietnam and Ascott businesses, and acquired a portfolio of prime sites in Shanghai through the US$2.2bn acquisition of Orient Overseas Developments Limited (OODL) which helped to expand its presence in China to 36 percent of the Group’s asset base.
In the next 10 years CapitaLand will continue to be guided by the same principles that have taken it so far so quickly. The Group will strive to produce good returns, be highly reputable and have a well established presence throughout Asia.
