The manager of CapitaLand Ascendas REIT (CLAR) has recently announced their divestment of the Singapore industrial building KA Place for a consideration of $35.38 million. An April 20th filing by the REIT’s trustee, HSBC Institutional Trust Services (Singapore), revealed that a sale and purchase agreement had been signed to sell KA Place to KA Place SPV 1.
This figure of $35.38 million represents a 219% premium to the purchase price of $11.1 million in March 2005, and a 55% premium to the property’s market valuation of $22.8 million as at December 31st 2022. The building, located at 159 Kampong Ampat, is a seven-storey high-specification industrial building with a second-story carpark, and a total gross floor area of 10,163 sq m, with a remaining land lease tenure of 35 years.
The manager of CLAR has stated that this divestment is part of their proactive asset management strategy aimed at improving the quality of their portfolio, and optimizing returns for unitholders. They further stated that “after careful evaluation, the manager has decided that it is an opportune time to divest the property and redeploy the capital towards value-adding opportunities.”
If the divestment were completed on January 1, 2022, the projected pro-forma impact on CLAR’s net property income (NPI) and distribution per unit (DPU) for the financial year ended December 31, 2022 would be a drop of $0.92 million and 0.005 Singapore cents, respectively.
Net proceeds after divestment costs are fixed at $30.65 million, and CLAR’s manager plans to use these funds to finance committed investments, repay existing debt, extend loans to subsidiaries, fund working capital, or make distributions to unitholders. Using the net proceeds to repay CLAR’s borrowings as at December 31, 2022, their aggregate leverage will be reduced from 36.3% to approximately 36.2%.
The proposed divestment is expected to complete within the second quarter of 2023. At that time, 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 October 9, 2002 constituting CLAR, the manager is entitled to a divestment fee of 0.5% of the sale consideration of the property, payable in cash.
Units in CapitaLand Ascendas REIT closed at $2.88 on April 20, representing a 3 cent rise, or 1.05%, from the previous day’s closing price.
The proposed divestment of KA Place reflects CLAR’s continued commitment to optimizing returns for their unitholders, and improving their portfolio quality. Assuming completion of the divestment, the net proceeds can be recycled to finance committed investments, and, following repayment of their borrowings, the aggregate leverage will be significantly reduced. Units in CapitaLand Ascendas REIT closed at $2.88 on April 20, a 3 cent rise from the previous day.