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

The manager of CapitaLand Ascendas REIT (CLAR) has recently announced the divestment of a Singapore industrial building named KA Place for a consideration of $35.38 million. This figure is a 219% premium on CLAR’s purchase price of $11.1 million from March 2005, and also a 55% premium to the property’s market valuation of $22.8 million as at Dec 31, 2022.

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

According to an April 20 filing, the REIT’s trustee, HSBC Institutional Trust Services (Singapore), has entered into a sale and purchase agreement to sell KA Place to KA Place SPV 1. The proposed divestment is in line with the manager’s strategy to improve the quality of CLAR’s portfolio and optimise returns for unitholders.

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Assuming that the divestment was completed on January 1, 2022, it would have had a pro-forma impact on CLAR’s net property income (NPI) and distribution per unit (DPU) for the financial year ended Dec 31, 2022. This impact was estimated to be a decrease of $0.92 million and 0.005 Singapore cents, respectively.

After accounting for divestment costs, the expected net proceeds of the divestment is $30.65 million. The manager states that these funds may be used to fund committed investments, repay existing debt, extend loans to subsidiaries, fund general corporate and working capital needs, and/or make distributions to unitholders. If the net proceeds are used to repay CLAR’s borrowings as at Dec 31, 2022, CLAR’s aggregate leverage will be reduced from 36.3% to approximately 36.2%.

The divestment is expected to complete within 2Q2023. Upon completion, CLAR will own 229 properties from Singapore, Australia, the United States, the United Kingdom and Europe. Additionally, in accordance with its trust deed dated Oct 9, 2002, the manager is entitled 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.

The proposed divestment of KA Place is part of the manager’s proactive asset management strategy to optimize returns for unitholders and improve the quality of CLAR’s portfolio. As such, the net proceeds from the divestment may be deployed in a number of ways to enhance returns, such as funding committed investments, repaying existing debt, and making distributions to unitholders. On completion, CLAR will own 229 properties across Singapore, Australia, the United States, the United Kingdom, and Europe.