CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT) are expected to merge, creating a diversified commercial real estate investment trust (REIT) to be named CapitaLand Integrated Commercial Trust (CICT), announced CapitaLand Mall Trust Management Limited (CMTML) and CapitaLand Commercial Trust Management Limited (CCTML), the respective managers of CMT and CCT.

CICT is expected to be the third-largest REIT in Asia-Pacific (APAC) and the largest REIT in Singapore, with a market capitalization of S$16.8 billion (US$12.45 billion) and a combined property value of S$22.9 billion.

The proposed merger will be affected by way of a trust scheme of arrangement, with CMT acquiring all units of CCT (CCT Units) for a total consideration comprising approximately 88% in new units in CMT (CMT Units) and 12% in cash. The consideration per CCT Unit comprises 0.720 new CMT Units and S$0.2590 in cash. This implies a gross exchange ratio of 0.820.

Following the proposed merger, CapitaLand Limited will retain its sponsor stake of approximately 29.1% in the merged entity.

CICT brings together CMT’s portfolio of 15 downtown and suburban malls in Singapore with CCT’s portfolio of 10 prime office assets – eight in Singapore and two in Frankfurt, Germany. It will become the largest proxy for Singapore commercial real estate with a portfolio of 244 properties valued at S$22.9 billion, of which 96% of this value are assets located in Singapore.

Soo Kok Leng, Chairman of CCTML, says, “As of today, about 29% of the combined portfolio value of the two REITs already features integrated retail and office components. This includes Raffles City Singapore, which is co-owned by CMT and CCT. It is therefore a logical progression for both REITs to come together as one entity to more efficiently capture additional growth opportunities over the long term.”

Tony Tan, CEO of CMTML, says, “The merged entity will have a combined property value almost double that of CMT’s, and a 75% larger market capitalization from where we are today. On a pro forma basis, FY 2019 distribution per unit would have increased by 1.6%. In addition, while Singapore remains the predominant focus, the merged entity can undertake overseas acquisitions in developed countries of up to 20% of property value or S$4.6 billion.”

Kevin Chee, CEO of CCTML, says, “On a pro forma basis, FY 2019 distribution per unit for CCT unitholders would have grown by 6.5%.”

Credit Suisse (Singapore) is the sole financial adviser to CCT in respect of the merger.