CapitaLand charts global expansion with US multifamily debut

Majority of the Singaporean firm’s real estate investments are in Singapore and China, but the firm is now planning to increase its share of investments outside Asia.

Global expansion is on the agenda for the Singapore-listed real estate conglomerate CapitaLand.

As a part of a push to diversify its investments outside of its main markets Singapore and China, CapitaLand International, the wholly-owned subsidiary of CapitaLand responsible for overseeing its global investment portfolio, has made a debut in the US multifamily sector, with the acquisition of 16 multifamily assets for $835 million. The transaction is expected to be finalized during fourth quarter of 2018.

Gerald Yong, chief executive officer at CapitaLand International, told PERE that its real estate investments in Singapore and China make up around 80 percent of CapitaLand’s business in terms of asset value and income. Although growth in these strongholds, as well as in the emerging market of Vietnam, is still on the agenda, the firm also aspires to grow its investment portfolio outside Asia.

“We consider China as an emerging market. Being a major listed property company, it is wise for CapitaLand to balance the risk in terms of developing and developed markets,” Yong said. “Besides diversification, we want growth and tap into new businesses and income streams. US multifamily meets these criteria.”

Yong did not wish to elaborate on the future allocation targets for different geographies. He explained the objective to grow the firm’s global portfolio without being too fixated about allocation percentages.

The latest acquisition in the US comprises assets in Seattle, Portland, Greater Los Angeles, and Denver. With CapitaLand being the operating manager, the plan is to expand the firm’s market presence beyond the country headquarters in New York. CapitaLand first set up its US office three years ago, when it made a foray into the country’s hospitality sector. Through the group’s hotels and serviced residential affiliate Ascott and the Ascott REIT, it acquired five properties with a total of 1,260 units across Manhattan, New York and the Silicon Valley region in California.

“We will focus on growing the multifamily portfolio in the US through local teams that will enhance the portfolio value through renovations. Then, we will continue to acquire multifamily assets to bulk up and increase the portfolio,” Yong said.

Eventually, CapitaLand will also consider spinning off some of the multifamily assets into investment vehicles and partnerships.

According to an analysis of the deal by Macquarie Capital Securities, the transaction will more than double CapitaLand’s total asset under management to over $1.5 billion. This effectively means a 1.8 percent increase of the real estate conglomerate’s total assets to S$63.6 billion ($46.5 billion; €39.7 billion), with international markets now making up 14 percent of the share, up from 12 percent as of end-June 2018.

“With assets from developed markets now comprising 57.7 percent of the total portfolio, we believe that CAPL [CapitaLand] will continue to scale up in its core emerging markets of China and Vietnam to achieve its target mix of 50:50 emerging vs developed markets,” Tuck Yin Soong, executive director at Macquarie Securities Singapore, wrote in the research report.

Besides the US, CapitaLand International will also invest in markets in Western Europe, Australia, and Japan. Other recent investments include the acquisition of two office assets in Frankfurt in December 2017 for €245 million and in May 2018 for €356 million. The latter marked the foray into Europe of the CapitaLand group’s Singapore-listed CapitaLand Commercial Trust REIT.