CapitaLand Ascendas REIT divests local industrial building at 219% premium from 2005 purchase price

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CLAR has a market capitalisation of $4.46 billion as at 12.20pm on April 20.

CLAR’s Manager has announced the divestment of Singapore industrial building KA Place for a consideration of $35.38 million. The proposed divestment is part of an active asset management strategy to improve the quality of CLAR’s portfolio and optimise returns for unitholders.

According to an April 20 filing, the REIT’s trustee, HSBC Institutional Trust Services (Singapore), has entered into a sale and purchase agreement to sell KA Place to KA Place SPV 1. This is a 219% premium to CLAR’s original purchase price of $11.1 million back in March 2005, and a 55% premium to the property’s Dec 31, 2022 market valuation of $22.8 million.

KA Place is a seven-storey high-specification industrial building located at 159 Kampong Ampat. The edifice includes a carpark on the second storey and has a total gross floor area of 10,163 sq m, with a remaining land lease tenure of about 35 years.

Net proceeds after divestment costs are expected to be $30.65 million. The manager says the net proceeds may be used to fund committed investments, repay existing indebtedness, make distributions to unitholders, or extend loans to subsidiaries.

Assuming the proposed divestment was completed on Jan 1, 2022, the pro-forma impact on CLAR’s net property income (NPI) and distribution per unit (DPU) for the financial year ended Dec 31, 2022 would have been a decrease of $0.92 million and 0.005 Singapore cents, respectively.

Using the net proceeds to repay CLAR’s borrowings as at Dec 31, 2022, the aggregate leverage will be reduced from 36.3% to approximately 36.2%. The proposed divestment is expected to complete within 2Q2023.

In accordance with the trust deed dated Oct 9, 2002 constituting CLAR, the manager is entitled to a divestment fee of 0.5% of the sale consideration of the property, which would be paid in cash.

Units in CapitaLand Ascendas REIT closed 3 cents higher, or 1.05% up, at $2.88 on April 20. CLAR has a market capitalisation of $4.46 billion as at 12.20pm on April 20.

The proposed divestment of KA Place is part of the manager’s asset management strategy to optimize returns for unitholders and provide better quality in CLAR’s portfolio. This divestment will enable the REIT to reinvest the net proceeds into value-adding opportunities.

The consideration sum represents a 219% premium to CLAR’s purchase price of $11.1 million in March 2005, and a 55% premium to the property’s Dec 31, 2022 market valuation of $22.8 million. The net proceeds after divestment costs are estimated to be $30.65 million, making it a great deal for the REIT.

Moreover, if the net proceeds were used to repay CLAR’s borrowings as at Dec 31, 2022, CLAR’s overall leverage will further decrease from 36.3% to approximately 36.2% – translating to improved financial health.

Units in CapitaLand Ascendas REIT closed 3 cents higher, or 1.05% up, at $2.88 on April 20. Market capitalisation recorded a total of $4.46 billion as at 12.20pm on April 20.

In accordance with the trust deed, the manager will receive a divestment fee of 0.5% of the sale consideration of the property.

Upon completion of the divestment, which is expected to take place within 2Q2023, CLAR will own 229 properties, comprising 96 properties in Singapore, 36 properties in Australia, 48 properties in the United States and 49 properties in the United Kingdom and Europe.

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