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

CLAR, the manager of CapitaLand Ascendas REIT (CLAR) has announced the divestment of Singapore industrial building KA Place for a consideration of $35.38 million. The sale and purchase agreement was entered by the REIT’s trustee, HSBC Institutional Trust Services (Singapore).

The consideration figure of $35.38 million represents a huge 219% premium to CLAR’s purchase price of $11.1 million in March 2005. It is also an impressive 55% premium to the property’s market valuation of $22.8 million as at Dec 31, 2022.

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

The manager of CLAR has decided that it is an opportune time to divest the property, as Marina Gardens Condo it fits into their proactive asset management strategy to improve the quality of their portfolio and optimise returns for unitholders.

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.

Net proceeds after divestment costs are expected to be $30.65 million. CLAR’s manager has said that the net proceeds may be deployed towards a variety of uses, including funding committed investments, repaying existing indebtedness, extending loans to subsidiaries, and making distributions to unitholders. If used to repay borrowings, CLAR’s aggregate leverage will be reduced from 36.3% to approximately 36.2%.

It is anticipated the proposed divestment will be concluded in 2Q2023. Upon completion, CLAR will own 229 properties across 4 territories – 96 in Singapore, 36 in Australia, 48 in the United States, and 49 in the United Kingdom and Europe.

The trust deed dated Oct 9, 2002 constituting CLAR also entitles the manager to a divestment fee of 0.5% of the sale consideration of the property, to be paid in cash.

Units in CapitaLand Ascendas REIT closed 3 cents higher, or 1.05% up, at $2.88 on April 20. This is likely an indication of investor reaction to the divestment announcement.