CMA / CRCT

CMA / CRCT: secured the public tender for Grand Canyon Mall in Beijing for Rmb 1.82b (inclusive of acq related expenses), which works out to ~Rmb 26,000 psm. Pursuant to the right-of-first-refusal granted to CRCT, the latter will acquire the mall from CMA (based on NAV plus reimbursable amounts), subject to the govt’s approval and requisite financing. The transaction is estimated by the co to be completed sometime in 1Q14. CRCT has indicated that it is looking to tap the equity mkts to raise about Rmb 200-400m to finance the deal. Based on the acquisition price, the transaction yield works out to an estimated ~3.5%. The manager believes that the mall is currently under-rented, with current passing rental of btwn Rmb 150-200 psm pm, about 30-40% below existing Beijing malls within CMA’s portfolio. CMA / CRCT believes that the mall would be able to hit a target NPI of 7-8% in 4-5 yrs time, post tenant repositioning and AEI. Expect yields to be boosted on rent reversions (27% of leases expiring this year and an additional 25% of leases expiring over 2014-15), and higher occupancy (from 93% now to 100% potentially). Nomura believes investors will view the deal to be neutral from CMA’s perspective, and that any stock price will be minimal. Nevertheless the house maintains at Buy with TP $2.49, with the stock currently trading at 23% discount to its RNAV. Deutsche maintains at Hold with TP $2.09.