International banks retain capital markets edge for CapitaLand

Chris Wright
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The cross-border footprint and product sophistication of global banks serve the complex needs of CapitaLand, the Singapore real estate developer.

One could argue CapitaLand, the real estate behemoth, is the corporate equivalent of its Singapore counterpart, DBS Bank, which is perhaps no surprise given their common state part-ownership through Temasek. Just like DBS, CapitaLand is something of a flagship of the island nation, and has sought to grow from domestic roots. Today, CapitaLand and DBS are similarly diversified: as of December, Singapore accounts for only 33% of total assets and 44% of group EBIT; China is 39% of assets, Australia 16%, Europe 3% and elsewhere in Asia 9%. Along the way, CapitaLand has pretty much pioneered the Reit market in Singapore, and is considered the region’s most diversified and successful. It has six Reits around the region and $37.1 billion under management in them and other financial products. This expansion has brought a need for more complex banking services. “We have become more sophisticated,” says CapitaLand, in written answers to Euromoney, noting, as it has grown, it taps its network relationships with the banks in the regions where it has expanded. One might think that might favour international banks, but asked whether locals have grown into international banking areas, CapitaLand responds: “Yes, there is a growth of prominence for the local banks.” That appears to be more the case in transactional than capital markets needs, though. “In the debt and equity capital markets, the local banks continue to make inroads in some products, but the international banks continue to play a more significant role simply due to the breadth of their network and expertise.” In practice, CapitaLand’s capital market landmarks tend to mix locals (particularly DBS) and internationals known for a substantial local presence (HSBC and Standard Chartered, for example, which accompanied DBS as joint leads on a landmark $645 million commercial mortgage-backed securitization in June 2011, occupy iconic buildings on the Singapore waterfront and are leading local employers). Its most recent sizeable IPO, of the CapitaMalls Asia shopping centre operator, combined DBS, JP Morgan, Credit Suisse and Deutsche. CapitaLand says it selects banks “based on the most optimal terms, advice and track records of the banks” regardless of their origin. The company’s focus on China, which has grown dramatically in recent years and now represents the largest single constituent of the overall asset base, is going to create some interesting banking needs as the RMB becomes more international, but that appears to be for the future. Internationalization has had “no immediate impact as yet, as injecting offshore RMB into China for real estate business still requires regulatory guidelines”, the company says. “However, it is a trend we are watching closely, given our extensive business in China.”