TLDR;
The CEO of Capital Land China Trust (CLCT), Jari, presents the company's 2025 results, highlighting its unique position as the first and largest China-focused REIT with diversified exposure to China's domestic growth sectors, connecting both S-REIT and C-REIT markets. CLCT's strategy focuses on unlocking and creating value through asset recycling via the C-REIT platform, proactive asset enhancements (AEIs), and diligent capital management to drive down interest costs and mitigate FX risks. Despite challenges in certain sectors, CLCT aims to improve DPU through strategic acquisitions, AEIs, and capitalizing on the strengthening RMB.
- CLCT's total assets are valued at $4.5 billion, comprising retail malls, business parks, and logistics assets primarily in Tier 1 and Tier 2 cities.
- The establishment and listing of the CREIT platform (CLCR) on the Shanghai Stock Exchange is a key highlight, enabling asset recycling at premium valuations.
- Focus on proactive capital management to reduce borrowing costs and FX risk, with increased RMB-denominated debt for natural hedging.
Introduction to CLCT and 2025 Results [0:06]
Jari, the CEO of Capital Land China Trust (CLCT), introduces the company as the first and largest China-focused asset REIT with diversified exposure to China's domestic growth sectors, uniquely connecting S-REIT and C-REIT markets. CLCT has total assets of $4.5 billion, including eight retail malls, five business parks, and four logistics assets, predominantly in Tier 1 and Tier 2 cities. The distribution yield is approximately 7% based on the current trading price. Retail is the largest and most resilient asset class, comprising 69% of gross rental income, while new economy assets (business parks and logistics parks) make up 30%.
Strategic Highlights: CREIT Platform and Asset Divestment [2:19]
A key highlight for CLCT in 2025 was the establishment and listing of its CREIT platform, CLCR, on the Shanghai Stock Exchange, co-sponsored with its parent company. CLCT injected its mature asset, CapitalMall Qinhua Ting, into the CREIT at a premium to valuation. The successful listing and subsequent trading performance of CLCR validate the value and liquidity of CLCT's retail assets. The divestment of Yu Hua Ting in 2025 impacted the full-year financial results due to the loss of income, which CLCT aims to address in 2026 through new investments.
2025 Financial Performance [4:28]
Overall business conditions in 2025 were challenging, with retail showing relative resilience, logistics stabilizing, and business parks experiencing weak demand. Portfolio gross revenue and NPI decreased by 9% year-on-year, narrowing to a 6% drop on a same-store basis excluding the divested Uva Ting. Retail mall revenue declined by 9%, but this narrowed to 5% on a same-store basis. CLCT embarked on several AEIs across four malls, which are expected to contribute positively by the end of 2025 and into 2026. Weakness in results also stemmed from the repositioning of Singlan mall and weaker rents and occupancy in Grand Canyon Mall and Wan Singh.
Sector Performance: Business Parks and Logistics [6:21]
The business park sector experienced a 9% decline in revenue due to lower rents and occupancy in Hangzhou and Xi'an. In Hangzhou, the pre-termination of a service office master tenant impacted performance, while in Xi'an, delays in backfilling vacancy at AIIT affected results. However, occupancy at AIT in Xi'an has recovered to 85%. The logistics sector showed positive revenue variance, with occupancy at 97.6% due to a lease secured for the Shanghai Fengxian asset.
Distribution Per Unit (DPU) and Operational Results [8:27]
The DPU for the second half of 2025 was 2.33 cents, and the full-year 2025 DPU was 4.2 cents, including a one-time top-up distribution of 0.33 cents to compensate for the loss of income from the Huateng divestment. This top-up was drawn from past divestment gains and has a marginal impact on gearing. Shopper traffic and tenant sales in retail assets improved, with traffic growing by 2.7% year-on-year and tenant sales by 2.1%. Tenant sales are now slightly above pre-COVID levels, while traffic is about 5-6% below. Occupancy costs are at a healthy level of 17.5%.
Retail Trade Categories and Occupancy [10:24]
Strong trade categories include F&B (plus 5.8%), IT (plus 9%), jewelry and watches (plus 18%), and toys and hobbies (plus 52%). Supermarkets also saw strong sales growth after AEIs. Fashion and beauty categories experienced a decline in sales. Most malls have very strong occupancy rates, with the exception of C9, which is undergoing repositioning. Rental reversion is at minus 2.4%, impacted by EV tenant consolidation; without the EV impact, it would be minus 0.6%.
Business Parks: Occupancy and Performance [15:22]
The business park sector faces weaker demand and ample supply, but CLCT's overall occupancy is at 86.7%, outperforming sub-markets. SingSue remains the strongest business park asset with 95% occupancy, benefiting from a manufacturing resurgence in China. In Xi'an, progress has been made with electronics and ICT tenants, with AIT occupancy at 85.2%. Hangzhou faces a more challenging environment with significant supply. BP reversions are weak at minus 8%, driven by challenges in Hangzhou and Xi'an.
Logistics and Portfolio Valuation [19:22]
The logistics portfolio has stabilized with high occupancy at 98.1%, driven by the full lease-out of Shanghai Fengxian. Rents are expected to have bottomed out in this category. Portfolio valuation saw a small drop of 0.8%, with impairments in assets with weaker performance.
Capital Management [20:52]
Ling Tong, the CFO designate, discusses capital management efforts, focusing on maintaining a healthy financial position and lowering borrowing costs. Total debt has reduced by approximately 150 million Singapore dollars year-on-year, with aggregate leverage at 40.7%. Interest expense savings of 8% were achieved compared to 2024, and the cost of debt in 2025 is 3.32%. CLCT benefits from interest rate decreases in both China and Singapore, with increased exposure to RMB borrowing. The interest coverage ratio is 2.8 times, well above the MAS limit. 72% of distribution income is hedged to stabilize cash flow.
Debt Profile and Hedging Strategies [23:56]
The debt maturity profile is well-staggered to manage refinancing risk, with no more than 25% of total debt due each year. For 2026, only one offshore bond of RMB 600 million is due. CLCT has diversified funding sources and enjoys connectivity with capital markets and banks in both Greater China and Singapore. Balance sheet natural hedging has been stepped up by borrowing more debt in RMB, increasing RMB-denominated debt to 60% of the total debt portfolio. The interest rate hedging ratio is 68%, with most loans in fixed rate or swapped into a fixed interest rate.
Looking Forward to 2026: Strategies and Objectives [27:23]
In 2026, CLCT aims to build on the successful AEIs completed in 2025, which have shown returns and rental increases of more than 10%. The strategy focuses on unlocking value through the CREIT platform, creating value through AEIs, and proactive capital management to drive down interest costs and reduce FX risk. CLCT intends to expand its presence in Tier 1 and Tier 2 cities by sourcing good assets and replenishing lost income.
Q&A: Reversion Expectations and Unit Price [30:14]
Reversion expectations for 2026 are slightly negative for retail (around -2%) and business parks, while logistics are expected to be flat to slightly negative. The strategy to address the unit price trading below NAV includes demonstrating the value of assets through securitization into the CREIT platform. Macro factors, such as challenges in China and the Iran war, also impact the unit price, but CLCT aims to communicate the limited direct impact on its business operations.
Q&A: Domestic Consumption and DPU Decline [36:58]
Strong domestic consumption is seen in F&B, IT, jewelry, and toys and hobbies, which CLCT aims to incorporate into its malls through AEIs. The decline in DPU over the last five years is attributed to FX, interest rates, and asset performance. CLCT is addressing these factors through hedging, reducing the cost of debt, and stabilizing the new economy sectors.
Q&A: Acquisitions and Capital Raising [46:42]
While truly distressed assets are harder to find, CLCT is open to exploring acquisition opportunities, particularly in business parks and logistics, at deeper discounts. The focus is on balancing pricing with asset stability. CLCT is actively looking for an asset to replace the loss-rewarding asset and prefers to acquire based on its own balance sheet rather than raising too much equity. Expanding retail malls in other China cities, including Tier 2 cities, is also under consideration.
Closing Remarks [52:49]
CLCT aims to build on its strategic setup as a unique platform with connections in both Singapore and China capital markets through the CREIT connection. The focus is on finding an asset to add value and potentially reinject into a CREIT, organically increasing DPU through buying at a higher yield and selling at a lower yield.
