CapitaLand Ascendas REIT divests local industrial building at 219% premium from 2005 purchase price
CLAR manager has decided to divest the KA Place property in Singapore at a 219% premium to its purchase price of $11.1 million in 2005. For a consideration of $35.38 million, HSBC Institutional Trust Services (Singapore) has entered into a sale and purchase agreement with KA Place SPV 1.The seven-storey high-specification industrial building offers 10,163 sq m in total gross floor area and a remaining land lease tenure of approximately 35 years. According to the manager, the divestment is in line with the REIT’s active asset management policy and is meant to improve its portfolio and optimise returns for unitholders.
If the divestment is completed on Jan 1, 2022, the pro-forma impact on the REIT’s net property income and distribution per unit would be a reduction of $0.92 million and 0.005 Singapore cents respectively. The net proceeds are estimated to be $30.65 million, which could be used to fund committed investments, debt repayments, loans to subsidiaries, or even distributed to unitholders.
The manager is entitled to a divestment fee of 0.5% of the sale consideration – to be paid in cash – in accordance with the trust deed dated Oct 9, 2002.
At the close of the trading session on April 20, units in CapitaLand Ascendas REIT had risen 1.05%, or by 3 cents, to $2.88. Once the proposed divestment is complete, CLAR will own 229 properties, spread across Singapore, Australia, US, UK and Europe.
Destruction of the KA Place property is meant to aid CLAR in reaching its goal, and with the net proceeds of the transaction, CLAR could obtain additional capital to finance numerous projects. After deployment, CLAR’s aggregate leverage will drop from 36.3% to roughly 36.2%. The proposed divestment is expected to finish during the second quarter of 2023.
Ultimately, the divestment of KA Place is an effective decision by the manager of CapitaLand Ascendas REIT to pursue its goal of improving the quality of its portfolio and maximising returns to unitholders.