CapitaRetail China Trust (CRCT) listed on the Singapore Exchange in 2006. Back then, it was a pure China retail play, which owned just seven malls.
In 2015, it changed its name to CapitaLand Retail China Trust. But the more important rebrand came in 2020-2021, when it pivoted to invest in multi-asset real estate that included business-parks and logistic facilities. It became CapitaLand China Trust (CLCT).
Today, CLCT has a market cap of S$1.2 billion, with a NAV per unit of S$1.09, implying a price to NAV ratio of ~0.64x. And it currently yields ~7.5%.
Here’s 3 must-know insights about CLCT’s dividend yield and whether it’s sustainable.
Let’s dive in.
CLCT’s latest 1Q2025 performance
CLCT owns 18 properties across 12 cities in China. Out of the ~S$4.7 billion assets, nine are retail malls – making up 71% of its portfolio. The rest includes five business parks and four logistic parks.
In 1Q2025, CLCT underperformed by a significant amount. I’m not surprised, especially China’s tough economic situation.
Here’s what happened:
- Gross revenue fell by 6%
- Net property income (NPI) fell by 6.6%
- Its retail NPI declined by 4%
- Meanwhile, its business park NPI plunged 15%
This underperformance was driven by lower rents and lower occupancy rates in.
The business park segment was hit the hardest. The problem? Oversupply.
This doesn’t just lead to higher vacancy rates, but vacancies give tenants more bargaining power – negotiating for lower rents and reducing rental reversions.
But a silver lining is CLCT’s business parks have been doing much better than competitors within the same region.
The important question we should be asking is whether we think performance from here on will continue to deteriorate or improve.
With the way China’s economy is going, I’m not sure whether we’ve hit bottom yet.
CLCT’s high leverage
CLCT has S$1.87 billion in total debt. That’s an aggregate leverage of ~42.6%. This is higher than other listed SREITs.
While CLCT has an interest coverage ratio of 3.0x, I suspect this figure will drop as CLCT has a huge chunk of debt expiring between 2026 and 2029 to refinance.
Looking at the red square above, 77% of CLCT’s total debt is expiring up until 2029. Depending on what management wants to do, distributions will be lower.
One benefit that’s unique to CLCT is it has an average cost of debt of 3.5%. Its debt is denominated in cheaper, CNY debt.
This is expected to decrease greater than other REITS. Why?
We expect interest rate cuts and REITs should have lower interest rates and enjoy lower cost of debt.
However, China has been aggressively cutting interest rates versus other countries to prop up the economy.
Because 35% of CLCT’s debt is CNY denominated, I expect even lower interest rates.
Just take a look at China’s interest rate…
A new development: CapitaLand’s China REIT
In April 2025, CapitaLand Investment, which also owns Singapore’s biggest retail/office REIT, announced it’s looking to launch its first China REIT, CapitaLand Commercial C-REIT (CLCR), on the Shanghai Stock Exchange.
CLCT is involved. It will be seeding CLCR with a property. What this means is CLCT is essentially selling one of its properties, CapitaMall Yuhuating (located in Changsha, Hunan), while CLCR will acquire it at a proposed CNY748 million (~S$135 million).
This mall makes up less than 5% of CLCT’s retail portfolio.
Why is CLCT doing this? It wants to free up capital, take profits and reduce debt. Good for unitholders.
Another result of this transaction is CLCT will be investing a 5% stake in CLCR when it gets listed.
There is a lot of information on this slide, but basically Capitamall Yuhuating could potentially be sold at a higher price, and depending on what management does with the proceeds, we could see an immediate reduction in debt, increase in distributions, and increase in NAV.
CLCR is expected to be listed around 4Q2025, so we still haven’t gotten the full picture yet.
CLCT’s biggest risk: China’s economy
REITs and banks have a similarity that an indicator of its performance is often tied to its geography.
If an economy is healthy, customers are spending, businesses are expanding, and tenants don’t mind paying higher rents because they’re confident that they can still make a business profit.
Unfortunately for China, they’ve got some material headwinds. Because almost every macroeconomic indicator out there shows that China’s economy has a long way to recovering.
- May unemployment rate: 5%, sitting near historical highs since 2018
- Youth unemployment rate: 14.9%, at one point China stopped publishing this statistic because it was so bad
- Inflation rate: -0.1%, China has been fighting deflation for over 2 years now
- Consumer confidence: 87.8 points, near the lowest it’s been in the last 10 years
- Housing prices YoY change: -3.5%, most Chinese people have their net worths tied to houses
It is estimated 70% of the average Chinese citizen’s net worth is tied to their property.
So it definitely did not help China had a whole real estate meltdown between 2021 and 2024, but that’s another topic for another day.
But there’s more.
We haven’t even gotten into the China-U.S. geopolitics. The relationship between the US and China is at an all time low.
There are a lot of uncertainties behind Donald Trump and what he plans to do with China. One thing we’ll know for sure is the US will impose some form of tariff on China, further hampering its economy.
If I were to summarise China’s economy right now, they’ve got high unemployment, deflation, consumers are less confident than they were a decade ago, and they’re watching their net worth plummet as their main asset (their house) declines in value.
My final thoughts
CLCT has a great dividend yield. It’s also trading at a great price to NAV ratio.
However, I think more time is needed before the economy picks up, especially since US-China tensions are high.
Can it sustain its dividends? Well, my thoughts are it really depends on your outlook on China.
Personally, I don’t think we’ve hit the bottom yet, though I expect a recovery in the next one to three years.
