CapitaLand China Trust announces SGD NC3 perpetuals at an IPG of 4.25%

CapitaLand China Trust (CLCT) is a China-focused REIT listed in Singapore, with a diversified portfolio of retail, business park, and logistics properties across key Chinese cities.

CLCT plans to issue (through its trustee) new SGD NC3 perpetuals at an initial price guidance of 4.25%, for accredited and institutional investors only. Both the issuer and bonds are expected to be unrated. These perpetuals have their first reset date on 19 September 2028, with subsequent resets every 3 years after. The reset rate will be calculated using the 3y SORA plus the initial spread.

Proceeds will be used for general corporate and working capital purposes, investments, and/or the refinancing of existing borrowings. In particular, the issuer has highlighted that it intends to use these proceeds to refinance CRCTSP 3.375% Perpetual Corp (SGD), which has an upcoming reset date on 27 October 2025.

Financial highlights

(Data as of 1H25 [30 June 2025] in SGD terms, growth rates are YoY unless otherwise stated.)

CLCT saw lower gross revenues in 1H25, which were down by -6% in RMB terms to RMB 868m, or -8% in SGD terms to $146m. Management attributed this primarily to two factors. First, there were lower contributions from its retail portfolio due to ongoing upgrades at three malls – excluding sales from those upgrades, tenant sales would actually have increased by +2.5%. Second, lower occupancy in its business parks portfolio (from 87.6% in December 2024 to 86.9% in June 2025), coupled with weak rental reversions (last reported at -8%), meant that the segment remained under pressure.

Consequently, net property income also fell despite some cost savings throughout these 6 months. Net property income was down by -8% in RMB terms, and also -8% in SGD terms to $160m. Nonetheless, lower taxation costs (-30%) meant that total returns (profits) after tax were much improved, coming in at $39m in 1H25, 85% higher than the $21m in 1H24.

(Note: The lower taxation costs were due to the absence of a withholding tax payment relating to the divestment of a property recorded in 1H24. We do not expect such a large decline again in subsequent halves.)

Management does not usually provide numerical revenue and profit guidance to investors. However, they cited subdued business conditions, as well as ongoing uncertainty with regard to trade negotiations and RMB volatility. Looking ahead, management’s tone appears to be fairly cautious as a whole, with its properties expected to face occupancy and/or rental reversion pressures in multiple cities, including Guangzhou, Suzhou, Hangzhou, and Shanghai.

Credit highlights

CLCT’s total debt levels remained fairly stable from its last reporting, coming in at $1,821m in June 2025 (March 2025: $1,867m). Its MAS gearing ratio was 42.1%, which was improved from March’s 42.6%, but remains on the higher side compared to the typical SGD REIT/ real estate trust issuer. With the new issuance expected to be around the same size (or slightly bigger) compared to its other perpetuals resetting next month, we do not expect this new issuance to significantly affect CLCT’s gearing ratio, assuming they call their existing perpetuals next month.

Its interest coverage ratio fell slightly from 3.0x to 2.9x, while its average cost of debt was also marginally lower at 3.42% (March: 3.51%). We do not expect these to materially change over the coming months, as its borrowings are primarily in SGD and RMB, where we do not expect major rate declines in the near future (e.g. as the PBOC remains measured in its policy-setting).

It appears CLCT is focused on stabilising its operations and optimising its portfolio (e.g. through asset enhancements), rather than undertaking massive acquisitions. Hence, while its ratios today signal it may be slightly more leveraged than the typical property-related issuer, we do not expect CLCT’s credit profile to worsen materially in the coming quarters. We think the largest risk to its credit profile would come more from broader macroeconomic factors, such as if it results in a weaker operational performance and/or weaker profitability, which could in turn affect the cashflow and credit profile of CLCT.

About the new issue

The new issue’s IPG of 4.25% represents a sizeable pickup of just over 300bps over the 3y SORA (1.2350% as of 9 September 2025). The 4.25% figure is also generally higher compared to the yields of many other SGD perpetuals issued by property-related issuers (REITs and non-REITs), perhaps reflecting CLCT’s more leveraged profile (Table 1).

In addition, this new issue provides a decent yield pickup over its SGD fixed-rate bonds, which mature in close to 3 years and have a yield-to-maturity of around 2.4%. This yield differential between perpetual and fixed-rate bonds appears to be larger than that for other more leveraged issuers like ESR-REIT and Hotel Properties Limited.

• EREIT 6.000% Perpetual Corp (SGD) is trading at 4.6% yield-to-reset, versus EREIT 4.050% 27Feb2030 Corp (SGD)’s 3.4% yield-to-maturity.
• HPLSP 5.500% Perpetual Corp (SGD) is trading at 4.1% yield-to-reset, versus HPLSP 5.100% 03May2029 Corp (SGD)’s 3.1% yield-to-maturity.

Investors who wish to participate in this new issuance should note the risks relating to perpetuals, including non-call risks. As calls are at the full discretion of the issuer, they have every right to let it reset at the prevailing reset rate (based on 3y SORA). As we have shared in previous articles, issuers will consider (i) whether they wish to develop a stronger reputation for calling their perpetuals; and (ii) the economics of such a call. On the latter, non-call risks could potentially emerge if spreads widen from today.

We find this new issuance fairly priced. This new issuance will likely be best-suited for investors looking for yields around the 4% level and who are comfortable with undertaking slightly higher risks, due to the exposure to China assets and the aforementioned non-call risks embedded in perpetuals.

Table 1: Peer comparison (new issue bolded)

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in SUNSP 4.480% Perpetual Corp (SGD). The analyst who produced this report holds an NIL position in the abovementioned securities.