CRCT/ CMA

CRCT/ CMA: Announced this morning that it has entered into a conditional call option agreement with CMA to acquire Grand Canyon Mall in Beijing. Including acquisition expenses, the total investment cost for the mall is expected to be about RMB1.82b (S$373.0m), or about RMB26k (S$5,329) psm based on GFA (excluding the car park). CRCT intends to fund the acquisition using its existing cash and new debt of between $286.9m and $327.9m, with the balance from new equity financing. The transaction is expected to be completed by 2Q14. The mall has been valued at RMB1.83b as at 15 Apr 2013 by CBRE. The mall currently has an annualised net property income (NPI) yield of about 3.5%, based on the purchase price. The committed occupancy rate (92.7% as of Apr 2013) is expected to reach close to 100% next year. Leases accounting for about 27% of the mall’s monthly gross rent are expiring between this month and the end of the year. The proposed acquisition of Grand Canyon Mall is thus expected to be yield-accretive once the acquisition is completed. The target NPI yield is about 7.0% to 8.0% in the longer term. Given that CRCT will release its 2Q13 results soon, OCBC maintain its fair value of $1.58 and BUY rating for now.