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

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CLAR’s manager has announced the divestment of Singapore industrial building KA Place for a consideration of $35.38 million. The figure represents an impressive 219% premium to CLAR’s purchase price of $11.1 million in March 2005, as well as a 55% premium to the property’s market valuation of $22.8 million as of the end of 2022.

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

The proposed divestment is in line with the REIT’s proactive asset management strategy to improve the quality of CLAR’s portfolio and optimise returns for unitholders. After carefully evaluating the situation, the manager has decided that this is an opportune time to divest the property and deploy the proceeds from the sale towards value-adding opportunities.

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 be a decrease of $0.92 million and 0.005 Singapore cents, respectively. It is expected that the net proceeds after divestment costs will amount to $30.65 million.

These proceeds could be used to fund committed investments, repay existing debt, extend loans to subsidiaries, fund general corporate and working capital needs, or to make distributions to unitholders. If the net proceeds were used to repay CLAR’s borrowings as at Dec 31, 2022, the REIT’s aggregate leverage would be reduced from 36.3% to approximately 36.2%.

The proposed divestment is expected to complete within 2Q2023. On completion, CLAR will own 229 properties comprising 96 in Singapore, 36 in Australia, 48 in the United States and 49 in the United Kingdom and Europe.

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.

The proposed divestment of KA Place marks an exciting opportunity for the trust to improve the quality of its portfolio and optimise returns for unitholders. The net Marina Gardens Condo proceeds, estimated at $30.65 million, may be recycled to fund committed investments, repay existing debt, extend loans to subsidiaries, fund general corporate and working capital needs, or to make distributions to unitholders.

The sale and purchase agreement was entered into by CLAR’s trustee, HSBC Institutional Trust Services (Singapore). The proposed divestment is expected to complete within 2Q2023, and the manager is entitled to a divestment fee of 0.5% of the sale consideration of the property.

Unitholders of CapitaLand Ascendas REIT were pleased by the news, as the units in the REIT closed 3 cents higher, or 1.05% up, at $2.88 on April 20.

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