CapitaLand China Trust Delivers Strategic Portfolio Optimisation Amid Economic Headwinds: Key Milestones, Financials, and Outlook for 3Q 2025

Key Highlights from the 3Q 2025 Business Updates

• Landmark C-REIT Listing: CapitaLand China Trust (CLCT) seeded CapitaMall Yuhuating into the newly listed CapitaLand Commercial C-REIT (CLCR) on the Shanghai Stock Exchange, making history as China’s first international-sponsored retail C-REIT. CLCT subscribed to 5% of CLCR units. The IPO was oversubscribed 254.5x by institutions and 535.2x by retail investors, with trading debuting 19.6% above IPO price. CLCR raised RMB2.29 billion—7% above initial estimates—delivering an estimated 2025 DPU yield of 4.4%.
• Perpetual Securities Issue: CLCT issued S\$150 million in fixed-rate subordinated perpetual securities, with a 3.4x subscription coverage. The proceeds support corporate, investment, refinancing, and redemption activities, further strengthening capital flexibility.
• GRESB 5-Star Rating: CLCT attained a 5-Star rating for the third consecutive year, achieving full marks for management and outperforming both peer and GRESB averages—a testament to its strong ESG credentials.

Financial Performance and Portfolio Dynamics

• Revenue and NPI Under Pressure: Gross revenue fell 8.0% YoY (-3.4% on same-store basis, excluding CapitaMall Yuhuating post-divestment). Net property income declined 8.5% YoY (-4.4% same-store). The retail segment saw an 8.4% drop in revenue, mainly due to asset divestment and weaker performance at certain malls. Business parks declined 9.1% YoY, while logistics parks bucked the trend, growing 13% YoY on improved occupancy.
• Retail Portfolio: High occupancy at 97.1%. However, the 9M 2025 retail reversion was -1.5%, driven by strategic tenant mix upgrades, such as repositioning mini-anchors and reducing reliance on high-rent automobile tenants. Notably, automobile trade category drag skewed this figure; excluding it, the reversion would be nearly flat at -0.2%.
• Business Parks: Occupancy at 85.2%. The portfolio faced oversupply and market softness, resulting in a steep 9M 2025 rental reversion of -8.9%. However, strategic conversions of serviced-office leases to direct leases in Hangzhou are underway to enhance tenant quality and reduce risk.
• Logistics Parks: Occupancy soared to 96.6%. Early renewal of anchor tenants solidified this position, but rental reversions were sharply negative at -24.5%, reflecting aggressive efforts to preserve occupancy and asset value in a competitive market.
• Shopper Traffic and Sales: Despite macroeconomic challenges, CLCT malls posted a 4.5% YoY increase in shopper traffic and a 2.3% rise in tenant sales over 9M 2025. Key growth categories included Toys & Hobbies (+56.4%), Information & Technology (+12.8%), and Jewellery & Watches (+16.6%), signaling effective tenant remixing and sector targeting. Golden Week 2025 saw impressive results, with sales per sqm up 10% YoY, highlighting AEI-driven improvements in tenant mix and mall execution.

Asset Enhancement Initiatives (AEI) Drive Organic Growth

• CapitaMall Wangjing: Transforming a large supermarket area into higher-yield retail space yielded a 12.6% ROI. 7Fresh supermarket delivered the best sales per sqm among North China CapitaMalls, and overall tenant sales and traffic during Golden Week 2025 surged +13% and +21% respectively.
• CapitaMall Xuefu: The conversion of 2,105 sqm into an “Animation, Comics & Games Street” achieved 100% occupancy, introducing nine new brands, including firsts for Northeast China. The AEI drove an 18% YoY jump in foot traffic and a 13.1% rental increase across the area.
• Portfolio-wide AEIs: Similar initiatives at CapitaMall Xizhimen and Rock Square continue to drive traffic, sales, and rental value, with F&B and experiential tenants playing key roles in the re-mix.

Capital Management and Financial Stability

• Gearing and Liquidity: Gearing reduced to 38.8% (from 42.1%), with total debt at S\$1.66 billion, average cost of debt at 3.36%, and interest coverage ratio (ICR) at 2.9x. CLCT has proactively refinanced 2026 maturities and increased RMB-denominated debt to 45%, aiming for 50% by year-end, enhancing its natural hedge and reducing FX risk.
• Debt Maturity Profile: Well-staggered, with no significant refinancing risk. Fixed rate borrowings account for 80%, further limiting interest rate volatility.

Portfolio Composition and Tenant Diversification

• Multi-Asset Exposure: CLCT’s S\$4.5 billion asset base comprises 69.9% retail, 26.5% business parks, and 3.6% logistics parks, well-aligned with China’s policy thrusts on domestic consumption and innovation. The top 10 tenants contribute only 8.8% of rental income, reflecting low tenant concentration risk. Key tenants include JD.com, Bestseller, POP MART, and Aeon.
• Lease Expiry and Retention: Portfolio WALE is 2.6 years by NLA. Retail retention by NLA is 40.9% for renewals and 59.1% for new leases, with supermarkets, F&B, and fashion leading new leasing. Business parks and logistics parks show robust renewal rates, especially logistics (99.8%).

Market Outlook and Strategic Positioning

• Macro Headwinds: China’s economy slowed to 4.8% YoY for 3Q 2025, with retail sales up 3.0% in September. The new 15th Five-Year Plan (2026-2030) aims to boost domestic demand and technological self-reliance. Trade tensions with the US have eased following a preliminary agreement, removing immediate tariff escalation risks.
• Policy Support: Fiscal and monetary stimuli—including rate cuts and consumption incentives—are rolling out, but business confidence recovery is expected to lag. CLCT’s portfolio is well-positioned to benefit from these policies, with retail assets set to capitalize on consumption growth and business park assets ready to tap into tech-driven sectors.
• Ongoing Risks: Pressures persist in business park rentals and occupancy due to oversupply, while logistics parks face competitive pricing dynamics. CLCT is actively exploring portfolio reconstitution and asset recycling to enhance financial flexibility and value extraction.

What Should Shareholders Watch?

• C-REIT Participation: CLCT’s strategic move into the C-REIT market via CLCR opens new capital market avenues and could provide upside from unit price appreciation and income streams. The successful divestment of CapitaMall Yuhuating and reinvestment into C-REIT units may unlock value and improve liquidity.
• Active Asset Management: Aggressive AEIs, tenant-mix optimization, and experiential enhancements support organic growth and potentially higher rental yields, countering sectoral headwinds.
• Capital Management: Early refinancing and increased RMB debt enhance financial resilience against currency and interest rate risks. Any further move towards RMB funding or asset recycling could materially impact future distributions and debt metrics.
• Resilient Retail and Logistics Segments: Sustained high occupancy in retail and logistics parks, coupled with sectoral growth in toys, IT, and F&B, signal robust underlying demand and support for cash flows.
• Potential Price Sensitivity: The landmark C-REIT IPO, strong AEI results, and proactive capital management are material developments that could drive re-rating of CLCT’s units. Conversely, continued softness in business parks and negative rental reversions remain risks to monitor.

Conclusion

CLCT’s 3Q 2025 business update demonstrates strategic agility and forward-looking management in the face of macroeconomic challenges. With milestone achievements in asset recycling, capital markets access, and operational enhancements, the trust is poised to leverage China’s policy support and domestic growth agenda. Investors should closely watch the unfolding impact of C-REIT participation, AEI-driven improvements, and ongoing capital management initiatives, as these could materially influence unit values and future distributions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell any securities. Investors are advised to conduct their own due diligence and consult professional advisers before making any investment decisions. Past performance is not indicative of future results. All information is based on publicly available reports and management disclosures as of October 30, 2025.

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