CapitaLand has disciplined investment mgt strategy

Source : Business Times – 2 Dec 2009

WE refer to the Reuters report published in your paper, ‘The importance of perseverance, perfectionism and paranoia’ (BT, Nov 27).

CapitaLand has always maintained a disciplined investment management strategy since its inception, buying and selling when target returns are met. We focus on capital productivity in real estate development and investment activities, while growing a balanced and solid base of sustainable fee and rental income. Our corporate strategy is to build lasting businesses for our shareholders.

We note the article’s statement that ‘CapitaLand has not been as savvy in predicting property market cycles’. While property cycles are notoriously difficult to predict, we think CapitaLand has done credibly in riding the market movement. We have successfully realised asset values through timely divestments at the peak of the cycle. We divested most of our Singapore office assets and sold virtually the entire stock of residential units over the last two years in a rising market, yielding attractive gains. CapitaLand did not bid aggressively for commercial sites at the peak of the market.

CapitaLand did record an impairment loss of $49 million in Q2 2009 for its share in the former Char Yong Gardens site located at Cairnhill Road, near Orchard Road. This was in response to the general market weakness during a downturn in the property cycle as a result of the unprecedented global financial crisis.

On the other hand, the Orchard Turn development (comprising ION Orchard and The Orchard Residences) today has a gross project value of $3.8 billion – a significant $1.4 billion (58 per cent) increase over its project cost of about $2.4 billion. Over the last three years, we have constantly achieved a return on equity (ROE) in excess of 12 per cent while maintaining a prudent debt-to-equity ratio. Through our disciplined investment approach, we believe we will continue to deliver shareholder value across the property cycle.

Wen Khai Meng
Chief investment officer CapitaLand Ltd