Transaction is part of CLAS’ active portfolio reconstitution strategy to drive sustainable returns to Stapled Securityholders
Singapore, February 2, 2024 -- CapitaLand Ascott Trust (CLAS) is divesting Citadines Mount Sophia Singapore to an unrelated third party for S$148 million. The 154-unit property will be divested at 19.4% above book value[1]. Net proceeds of the divestment are expected to be approximately S$138.6 million. The exit yield[2] is about 3.2% and CLAS will recognise a net gain of approximately S$14.6 million. The divestment is expected to be completed in 1Q 2024.
Ms Serena Teo, Chief Executive Officer of CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte. Ltd. (the Managers of CLAS), said: “We are divesting Citadines Mount Sophia Singapore at close to S$1 million per key, which is a significant premium to book value. Including Citadines Mount Sophia Singapore, CLAS has announced divestments of S$408.1 million of assets at a premium to book value in the last eight months. The divestment of 10 mature assets[3] will unlock S$38.9 million in gains, at an average exit yield of about 3.8%[4]. We aim to use the capital to reduce debt, fund our asset enhancement initiatives (AEI) or redeploy it into higher-yielding investments to increase the returns of our portfolio. The divestments can offer CLAS greater financial flexibility, potentially lowering our gearing by close to 2 percentage points[5].
In brief
CapitaLand Ascott Trust (CLAS) plans to sell Citadines Mount Sophia Singapore to an unrelated third party for S$148 million. The 154-unit property is priced 19.4% above book value, and the company expects net proceeds of about S$138.6 million and a net gain of approximately S$14.6 million. Completion is expected in the first quarter of 2024. CLAS says proceeds may be used to reduce debt, fund asset enhancement initiatives or support investment in higher-yielding properties. The sale forms part of its portfolio reconstitution strategy. CLAS also reported completing the sale of Courtyard by Marriott Sydney-North Ryde on January 31, 2024, and said the divestment of Novotel Sydney Parramatta is expected in the third quarter of 2024. After this transaction, CLAS expects to retain four lodging properties in Singapore.
Key takeaways
- CLAS agreed to sell Citadines Mount Sophia Singapore for S$148 million.
- The 154-unit property is priced 19.4% above book value.
- CLAS expects net proceeds of about S$138.6 million and a net gain of approximately S$14.6 million.
- The sale is expected to close in the first quarter of 2024.
“The divestment is part of our active portfolio reconstitution strategy. CLAS completed the acquisition of four assets[6] in the last three months at a higher entry yield and we look to expand our portfolio opportunistically with more yield-accretive assets. Over the past three years, distribution income gained from our investments has more than replaced the distribution income from the properties that were divested. CLAS also has eight properties[7] undergoing or will undergo AEI. Through our active portfolio reconstitution efforts and AEI plans, we continue to strengthen our portfolio to deliver long-term value to our Stapled Securityholders,” added Ms Teo.
CLAS has also completed the divestment of Courtyard by Marriott Sydney-North Ryde on 31 January 2024. It is one of two mature hotels in CLAS’ divestment pipeline in Australia[8]. Divestment of the other property, Novotel Sydney Parramatta is expected to be completed in 3Q 2024.
CLAS’ portfolio in Singapore
Singapore remains a key market for CLAS. Post-divestment, CLAS will have four lodging properties in Singapore. CLAS has three operational properties – Ascott Orchard Singapore, lyf one-north Singapore and The Robertson House by The Crest Collection. Currently under development, the 192-unit Somerset serviced residence at the popular riverfront lifestyle and entertainment Clarke Quay precinct remains on track for completion in 2H 2025.
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[1] Based on the independent valuation as at 31 December 2023.
[2] Exit yield is computed based on FY 2023 Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA).
[3] The 10 properties comprise four properties in regional France, two properties in Australia, three properties in Japan and one property in Singapore.
[4] The exit yield of the France and Australia properties is computed based on FY 2022 EBITDA. The exit yield of the Japan portfolio is not meaningful and has not been included in the average exit yield computation as the properties were largely closed in 2022. If included, the average exit yield will be about 2.8%.
[5] Assumes total proceeds from CLAS’ divestments in Australia, Japan and Singapore are deployed towards reducing CLAS’ debt and divestments will be completed in 2024.
[6] The four properties are The Cavendish London, Temple Bar Hotel in Dublin, Ascott Kuningan Jakarta and Teriha Ocean Stage.
[7] The eight properties are The Robertson House by The Crest Collection, Citadines Holborn-Covent Garden London, Citadines Les Halles Paris, Citadines Kurfürstendamm Berlin, La Clef Tour Eiffel Paris, Temple Bar Hotel, The Cavendish London and Novotel Sydney Central.
[8] CapitaLand Ascott Trust divests two hotels in Australia for AUD109.0 million.
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Questions around this news
How does the trust plan to use proceeds from its property sales?
The trust says it may use divestment proceeds to reduce debt, fund asset enhancement initiatives, or reinvest in higher-yielding properties. It also said proceeds from its Australia, Japan and Singapore divestments could be directed toward debt reduction, an assumption underlying its estimate that gearing could fall by close to two percentage points if the sales are completed in 2024.
What is a portfolio reconstitution strategy in property investing?
A portfolio reconstitution strategy involves changing the mix of properties an owner holds. This can include selling assets and using the capital to reduce debt, improve retained properties, or acquire other assets. The purpose and results depend on the owner’s objectives, market conditions and the performance of the properties involved.
What does exit yield mean in a property sale?
Exit yield is a measure of a property’s operating earnings relative to its value or sale price, calculated according to the method specified for the transaction. It can help describe the income return associated with a property, but comparisons may be affected by differences in calculation periods and included costs.
What is gearing, and how can selling properties affect it?
Gearing describes the extent to which an organisation uses debt relative to its assets or capital, though the precise calculation can vary. If a property sale’s proceeds are used to repay borrowing, debt may decrease; the effect on gearing depends on the organisation’s overall financial position and the measure it uses.
Earlier from CapitaLand Ascott Trust
- CapitaLand Ascott Trust increased FY 2023 Distribution per Stapled Security by 16% through stronger operating performance and new acquisitions
- CapitaLand Ascott Trust divests three hotels in Japan for JPY10.7 billion
- CapitaLand Ascott Trust divests two hotels in Australia for AUD109.0 million
- CapitaLand Ascott Trust completes divestment of four properties in regional France for EUR44.4 million
- CapitaLand Ascott Trust proposes S$530.8 million acquisition of three lodging assets in London, Dublin and Jakarta
