Singapore, February 6, 2024 – CapitaLand Ascott Trust (CLAS) has announced its plans to divest Citadines Mount Sophia Singapore in a strategic move that is expected to generate significant gains. The deal, valued at S$148 million, represents a remarkable 19.4% increase over the property’s book value at the end of 2023, according to a report by The Business Times.
I. The Deal Overview
In a bold strategic move, CapitaLand Ascott Trust (CLAS) is set to divest Citadines Mount Sophia Singapore for a staggering S$148 million, signaling a substantial increase over the property’s book value as of the end of 2023. This momentous transaction is anticipated to conclude in the first quarter of 2024, marking a pivotal moment for CLAS.
II. Premium Gains and Financial Impact
The Chief Executive of CLAS, Serena Teo, revealed that this divestment translates to nearly S$1 million per key, presenting a significant premium to the property’s book value. The transaction is expected to generate net proceeds of approximately S$138.6 million and a net gain of around S$14.6 million.
III. Strategic Alignment and Financial Flexibility
With an exit yield of 3.2%, calculated based on CLAS’ FY2023 earnings, this move aligns perfectly with the company’s strategy to unlock gains and enhance financial flexibility. Teo emphasized that the sale of Citadines Mount Sophia Singapore brings the total divested asset value for CLAS to an impressive S$408.1 million over the past eight months, spread across 10 mature assets. This will unlock around S$38.9 million in gains, with an average exit yield of about 3.8%.
IV. Capital Utilization Strategy
CLAS has outlined its intended use of the capital generated from these divestments. According to the statement from CLAS, “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.”
V. Market Response
The market’s response to this strategic move was notable, with stapled securities of CLAS trading at S$0.97, marking a 1% increase during the midday trading break on Friday. Investors and stakeholders are closely monitoring the developments as CLAS continues its growth trajectory.
VI. Expansion Plans
Looking forward, Serena Teo expressed CLAS’s intention to “expand (its) portfolio opportunistically with more yield-accretive assets.” She emphasized, “Over the past three years, distribution income gained from our investments has more than replaced the distribution income from the properties that were divested.” This demonstrates CLAS’s commitment to long-term value creation.
VII. Weave Living’s Joint Venture Acquisition
While the buyer of Citadines Mount Sophia Singapore is cryptically referred to as an “unrelated third party” by CLAS managers, Weave Living, a Hong Kong-based rental accommodation brand, made a significant announcement on the same day. Weave Living disclosed its joint venture acquisition of a property at the same address in collaboration with asset manager BlackRock.
VIII. Renovation and Rebranding
Weave Living’s Founder and Group CEO, Sachin Doshi, revealed ambitious plans for an extensive year-long renovation of the acquired property. The property is slated to reopen under their serviced accommodation brand, Weave Suites, by early 2025. This move is set to reshape the hospitality landscape in the area and offers exciting prospects for both residents and investors.
IX.Key Financial Figures
Here’s a table summarizing the key financial figures and impact of CLAS’s divestment of Citadines Mount Sophia Singapore:
|Premium Over Book Value
|Expected Net Proceeds
|Exit Yield (FY2023 earnings)
|Total Divested Asset Value (8 months)
|Average Exit Yield (8 months)
Here are some key takeaways from this significant development:
- CLAS’s divestment of Citadines Mount Sophia Singapore represents a substantial premium over the property’s book value, showcasing the trust’s ability to unlock gains.
- The strategic move aligns with CLAS’s goal of enhancing financial flexibility and creating value for stakeholders.
- Serena Teo, CEO of CLAS, emphasized the intention to utilize the capital from divestments for debt reduction, asset enhancement initiatives (AEI), or higher-yielding investments.
- Weave Living’s joint venture acquisition and renovation plans signify the dynamic nature of the hospitality industry in the region.
- CLAS investors have responded positively to this strategic move, with a 1% increase in stapled securities during trading.
- CLAS’s commitment to expanding its portfolio with yield-accretive assets and active portfolio reconstitution efforts highlights its dedication to long-term value creation.
This divestment marks a significant milestone for CLAS and the broader real estate and hospitality sectors. As the company continues to execute its growth strategy, stakeholders and industry observers are eager to see how this strategic move unfolds and its impact on the market.
Featured Image courtesy of CapitaLand