Mall giant looks to cheaper financing
CapitaMalls Asia, a Singapore-listed shopping centre developer, has diversified its source of funding as it faces higher borrowing costs on the mainland.
The firm is now issuing bonds instead of solely relying on increasingly expensive bank borrowing and also plans a secondary listing in Hong Kong.
'We took out a loan 10 to 15 per cent higher than the People's Bank of China benchmark interest rate,' chief executive Lim Beng-chee said. 'Previously, we obtained a bank loan at 10 per cent below the benchmark rate.' The higher borrowing costs started to hit earlier this year.
The People's Bank of China has raised the amount of funds commercial banks must keep in reserve six times this year.
It has also raised interest rates five times since October.
Lim declined to give the size of the last loan but said the company was under no funding pressure. CapitaMalls Asia raised S$200 million (HK$1.18 billion) through issuing bonds earlier this year.
Last Friday, the firm also announced it had applied for a secondary listing by introduction on the Hong Kong stock exchange. The stock is due to begin trading later this month.
CapitaMalls Asia is the region's leading shopping mall developer, with 97 properties across 51 locations in Singapore, China, Malaysia, Japan and India. It has 55 shopping centres in 35 mainland cities, of which 15 are under development.
'With cash reserves of S$1.2 billion and loans amounting to S$800 million, we are in a strong financial position,' Lim said. He played down the impact of austerity measures on the company, saying the tighter credit conditions were a short-term measure being used by the central government to rein in inflation.
Sales at its shopping malls during the 'golden week' holiday were unaffected by these measures.
For example, Lim said the CapitaMall Jinniu in Chengdu mainly served the local community and was not affected by any retail slowdown. 'A meal at Jinniu is as little as 20 yuan, People still have to buy basic necessities,' he said. Chan Kong Leong, general manager for West China, said sales at phase one of CapitaMall Jinniu jumped 25 per cent from a year ago.
The phase one development, which comprises 57,884 square metres, opened in 2006.
Rents at Jinniu phase one ranged from 90 to 500 yuan per square metre per month, compared with 30 to 100 yuan when it opened in 2006.
The mall's phase two development - comprising 90,600 square metres - is under construction and is scheduled to open in 2013.
The mainland accounts for 42 per cent of CapitaMalls' property portfolio.
The value, in US dollars, of the projects CapitaMalls manages on the mainland
- It plans 26 more malls in next three years