CapitaLand (SGX: C31) has taken the Singapore property sector by surprise by announcing the separation of its property development business and its property investment management business. Through the restructuring, CapitaLand will combine its investment management platform and lodging business into a new listed company called CapitaLand Investment Management (CLIM). This unit will also hold the stakes in CapitaLand’s stock market listed real estate investment trusts (REITs) and business trusts. The other part of CapitaLand’s business, namely, its property development arm, will be privatised as CLA Real Estate Holdings. It will subsequently be fully owned by Temasek Holdings.

Square pegs in round holes

The separation of CapitaLand into two distinct businesses, while surprising, is not entirely unprecedented. It is effectively a pigeonholing exercise to realign a disparate collection of entities into two separate companies that should be more focussed. No more forcing of square pegs into round holes. Something similar happened in Hong Kong last year....