CapitaLand China Trust - Weakness in Business Parks

Lower revenue and net property income

CapitaLand China Trust (CLCT) reported net property income (NPI) of RMB 292.5 million in 1Q 2025, a 6.6% decline compared to 1Q 2024. 

This was driven by a decline in revenue across its retail and business park assets, and partly offset by higher revenue for logistics park assets. 

Excluding a Business Park serviced office tenant that pre-terminated at Shanghai-Hangzhou Science Technology Park Phase II and supermarket upgrading at CapitaMall Wangjing, CapitaMall Xizhimen, and CapitaMall Xuefu, CLCT’s net property income would have declined by 4.0% year-on-year.

Retail revenue fell slightly

Retail revenue declined by 2.7% year-on-year, due to lower rents at CapitaMall Xinnan. 

Overall, CLCT maintained a high occupancy of 97.7% across its retail assets in 1Q 2025, though falling slightly from an occupancy of 98.2% in 4Q 2024. 

CLCT earned a positive rental reversion of +0.5% across its retail portfolio in 1Q 2025, boosted by upgrading of supermarkets at CapitaMall Xizhimen and CapitaMall Xuefu. 

Management of CLCT expects minimal first-order impact from the US trade tariffs, as its malls primarily serve China’s middle-income consumers, and CLCT’s retailers and tenants have minimal reliance on US imports for their products. 

Business Parks occupancy declined further

Business park revenue declined by 9.6% year-on-year, as the occupancy rate for its business park assets fell to 83.7% in 1Q 2025 from 87.6% in 4Q 2024 amidst oversupply. 

In particular, the occupancy rate at Singapore-Hangzhou Science Technology Park Phase II fell to 70.0% in 1Q 2025 from 84.4% in 4Q 2024. 

This was due to  the pretermination of the serviced office tenant that occupied 19.8% of NLA. The REIT manager had backfilled 8.8% of NLA (~45% of the vacated space) by March 2025 and another 3.2% (15% of the vacated space) in April 2025 through direct engagement with subtenants. Active leasing efforts are underway to secure tenants for the remaining space. 

According to CLCT, its business parks support local enterprises and regional markets, with only a very small proportion of tenants having direct US exposure. 

Logistics Parks revenue increased

Logistics parks revenue rose by 3.3% year-on-year due to an increase in occupancy at Kunshan Logistics Park. 

However, overall occupancy fell slightly to 95.7% in 1Q 2025 from 97.6% in 4Q 2024, due to lower occupancy at Chengdu Shuangliu Logistics Park with the expiry of F&B and Logistics & Warehouse tenants. 

Management believes that there is a healthy pipeline to raise the occupancy of the asset. 

Increase in RMB-denominated debt

CLCT’s gearing increased to 42.6% as at 31 March 2025 from 41.9% as at 31 December 2024, likely due to the weakening in the Chinese Yuan relative to the Singapore Dollar in the quarter. 

CLCT’s average cost of debt was at 3.51% in 1Q 2025, unchanged from 4Q 2024. CLCT launched a 3-year RMB 600 million bond at 2.88% due 2028 in April 2025, which will bring its RMB-denominated debt to 41% of total borrowings post-issuance. 

CLCT believes that it is on track to reach its target of having 50% of its borrowings to be in RMB-denominated debt by December 2025. 

Proposed participation in CapitaLand Commercial REIT

Earlier, CapitaLand Investment Limited (CLI) announced that it has applied to list CapitaLand Commercial C-REIT (CLCR) on the Shanghai Stock Exchange in China. 

CLCT announced that it has proposed to participate as a strategic investor of CLCR, which will be the first international-sponsored retail C-REIT, and the first C-REIT by a Singapore based company when listed. 

Management of CLCT believes that this will provide CLCT with the opportunity to enter the growing C-REIT market as a key stakeholder in CLCR, broaden access to China domestic capital market and provide unitholders with upside potential from C-REIT exposure.

Read also: CapitaLand China Trust - Gaining C-REIT exposure through CapitaLand Commercial C-REIT

Historical dividend yield of 8.4%

With a 12-month historical DPU of S$0.0565, CLCT’s shares trades at a distribution yield of 8.4% based on a share price of S$0.675. 

The REIT currently trades at a price-to-book valuation of 0.61x, inline with its historical average.

Read also:

• CapitaLand China Trust - Largest China-Focused Singapore REIT
• You have as many opportunities in China as there are places: CapitaLand China Trust's CEO

Related links:

• CapitaLand China Trust share price history and share price target
• CapitaLand China Trust history and dividend forecasts

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