In brief
CapitaLand Ascott Trust (CLAS) says it has agreed to sell Somerset Olympic Tower Tianjin, a 185-unit property in China, to an unrelated third party. The asset is expected to be sold above book value, though the release does not disclose a price. Completion is anticipated in the second quarter of 2025, subject to customary conditions. CEO Serena Teo said the disposal is part of CLAS’ portfolio-reconstitution strategy and is expected to have minimal effect on gross profit. China contributed 1.4% of CLAS’ total gross profit in the first half of 2024, and the trust expects to retain four properties there after the transaction. The release also describes other recent divestments, acquisitions and property enhancement work as part of its capital-recycling strategy.
Key takeaways
- CLAS agreed to divest Somerset Olympic Tower Tianjin to an unrelated third party.
- The 185-unit property is expected to sell above book value, with completion anticipated in 2Q 2025.
- CLAS says the sale will have minimal impact on gross profit and leave it with four properties in China.
- The trust reported close to S$400 million in year-to-date divestments and about S$54 million in gains from prior sales.
Singapore, October 23, 2024 -- CapitaLand Ascott Trust (CLAS) has entered into an agreement to divest Somerset Olympic Tower Tianjin in China to an unrelated third party. The 185-unit property will be divested at above book value[1], unlocking gains for CLAS’ Stapled Securityholders. The transaction, subject to customary conditions precedent, is expected to be completed in 2Q 2025. Somerset Olympic Tower Tianjin, which opened in 1998, is located in Heping District.
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 continually reconstitute CLAS’ portfolio by divesting mature properties such as Somerset Olympic Tower Tianjin and redeploying the proceeds towards more optimal uses. In 1H 2024, CLAS’ properties in China contributed 1.4% to our total gross profit. The divestment of Somerset Olympic Tower Tianjin will have minimal impact on our gross profit. Post divestment, we will have four properties[2] in China. With CLAS’ strong financial position, we stand ready to capture opportunities to deliver accretive growth for our Stapled Securityholders.”
Strengthening CLAS’ portfolio through its portfolio reconstitution strategy
Prior to Somerset Olympic Tower Tianjin, CLAS has divested a total of close to S$400 million in assets year to date. The properties were divested at a premium to book value, unlocking about S$54 million[3] in gains. CLAS also announced on 1 October 2024 that it will deploy proceeds from the divestment of Citadines Mount Sophia Singapore into the proposed acquisition of lyf Funan Singapore at an entry earnings before interest, taxes, depreciation and amortisation (EBITDA) yield of 4.7%[4], delivering accretion to Stapled Securityholders. Citadines Mount Sophia Singapore was divested in March 2024 at an exit yield of 3.2%.
Other acquisitions include a rental housing property in Fukuoka, Japan and the remaining 10% stake in Standard at Columbia, a student accommodation property in the United States of America in 1H 2024.
CLAS has also recently completed the asset enhancement initiative (AEI) for Citadines Holborn-Covent Garden London. Year to date, CLAS has completed AEIs for five of its properties[5]. CLAS has three[6] properties in its AEI pipeline to be completed between 4Q 2024 and 2026. These initiatives, when completed, are expected to enhance the quality of CLAS’ portfolio and uplift its distribution income.
------------------------------------
Notes
[1] More details to be provided upon completion.
[2] The four properties are Citadines Xinghai Suzhou, Citadines Zhuankou Wuhan, Somerset Grand Central Dalian and Somerset Heping Shenyang.
[3] Includes the transfer of S$19.3 million from the asset revaluation reserve to revenue reserve for the divestments in Australia.
[4] The EBITDA yield is computed based on the FY 2023 EBITDA and agreed property value of lyf Funan Singapore.
[5] The Robertson House by The Crest Collection in Singapore, Citadines Les Halles Paris, Citadines Kurfürstendamm Berlin, La Clef Tour Eiffel Paris and Citadines Holborn-Covent Garden London.
[6] Temple Bar Hotel Dublin, The Cavendish London and Sydney Central Hotel.
We continually reconstitute CLAS’ portfolio by divesting mature properties such as Somerset Olympic Tower Tianjin and redeploying the proceeds towards more optimal uses. The divestment of Somerset Olympic Tower Tianjin will have minimal impact on our gross profit. Post divestment, we will have four properties in China. With CLAS’ strong financial position, we stand ready to capture opportunities to deliver accretive growth for our Stapled Securityholders.
- Ms Serena Teo, Chief Executive Officer, the Managers of CLAS
If you detect any issues, problems, or errors in this press release content, kindly contact [email protected] to notify us (it is important to note that this email is the authorized channel for such matters, sending multiple emails to multiple addresses does not necessarily help expedite your request). We will respond and rectify the situation in the next 8 hours.
Questions around this news
When is the Somerset Olympic Tower Tianjin divestment expected to be completed?
The transaction is subject to customary conditions precedent and is expected to complete in the second quarter of 2025. The release says the 185-unit property is being sold to an unrelated third party at above book value. It does not provide the sale price; the release says more details will be provided upon completion.
How does the sale fit into the trust’s portfolio strategy?
The managers describe the sale as part of a strategy to dispose of mature properties and redirect proceeds toward other uses. The release also cites acquisitions and asset enhancement initiatives as ways to reconstitute the portfolio. It says the Tianjin property’s disposal is expected to have minimal impact on gross profit, and that four properties will remain in China afterward.
What does it mean to sell a property above book value?
Book value is the amount at which an asset is recorded in an organization’s accounts, after any applicable accounting adjustments. A sale above book value means the agreed sale price exceeds that recorded amount. It does not, by itself, show how much cash the seller will retain after costs, taxes, or other transaction-related items.
What is an EBITDA yield?
An EBITDA yield compares a property’s earnings before interest, taxes, depreciation, and amortisation with its value or purchase price. It is commonly used to describe the operating earnings associated with a property relative to its cost. It does not account for financing, taxes, capital spending, or other factors that affect cash available to an owner.
Earlier from CapitaLand Ascott Trust
- CapitaLand Ascott Trust divests Citadines Karasuma-Gojo Kyoto for JPY6.18 billion
- CapitaLand Ascott Trust to acquire lyf Funan Singapore at S$263 million
- CapitaLand Ascott Trust is the first lodging trust to secure OCBC 1.5°C loan
- CapitaLand Ascott Trust increases gross profit by 12% through sustained lodging demand and stronger operating performance
- CapitaLand Ascott Trust fully acquires student accommodation property Standard at Columbia to boost income resilience
