Press Statement: Questions to CapitaLand Commercial Trust (CCT) and CapitaLand Mall Trust (CMT) on proposed merger

Date: September 24, 2020

Please find the questions posed by SIAS to Mr. Tony Tan, CEO, CapitaLand Mall Trust and Mr. Kevin Chee, CEO, CapitaLand Commercial Trust regarding the proposed merger at the dialogue session organised by SIAS on 17 September 2020.

1. On pages 26 and 27 of the joint presentation (Proposed Merger of CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT), dated 4 September 2020), the pro forma distribution per unit (DPU) accretion to CMT and CCT unitholders are shown to be +4.1% and +7.6% respectively. It can be argued that these increases are simply an arithmetic outcome of a larger, combined net profit income divided by the smaller number of units of the Merged Entity. Can CMT/CCT management provide specific business plans to explain how it intends to improve DPU apart from the arithmetic effect?
2. The independent market report by CBRE on pages L-12 and L-19 of the Scheme Document states that “Islandwide retail rents are expected to experience further corrections in 2H 2020, with the widening of the two-tier market” and “Vacancy levels are expected to rise from relocations of major occupiers, downsizing of requirements and natural expiry of leases in 2020/2021. This will result in a further market correction and a downward pressure on office rents for the rest of 2020”, respectively. In addition, page 11 of the joint slides states that shopper traffic is 58% of pre-COVID-19 levels and page 12 states that only 24% of the office community has returned for the week ended 28th August 2020. Given the significant proportion (33%+38% = 71%) that retail and office take up in the merged entity, does CMT/CCT management believe that it can even achieve the DPU accretion stated in pages 26 and 27 of the joint slides which are dated June 2020? In the interest of all unitholders, would CMT/CCT management like to provide more realistic, estimated DPU accretion numbers rather than the pro forma accretion numbers?
3. Page 2 of the Scheme Document states that the proposed current term is 0.720 new CMT shares and S$0.2590 per CCT share. The unit price of CMT has dropped from S$2.59 (closing price on SGX on 21 January 2020 the last trading day immediately prior to the joint announcement date) to S$1.97 as of 11 September 2020. This is a significant reduction for CCT unitholders. Will CMT management consider improving its proposed terms?
4. Given point 3 above, does CCT management still consider this Merger proposal to be in the interest of its unitholders? If so, can CCT management provide specific reasons as to why it still supports the Merger despite the significant erosion of value to its own CCT unitholders?

Click here for the responses to the questions.

David Gerald
President & CEO
SIAS

CapitaLand Commercial Trust’s response to questions from SIAS, click here

CapitaLand Mall Trust’s response to questions from SIAS, click here

Joint News Release by CCT & CMT on key points raised at dialogue session organized by SIAS, click here