CapitaLand Ascott Trust is set to divest Citadines for S$148 million

SINGAPORE: CapitaLand Ascott Trust is set to divest Citadines Mount Sophia Singapore for S$148 million. The deal, expected to wrap up in the first quarter of 2024, signifies a sharp 19.4% increase over the serviced residence’s book value recorded at the end of 2023, The Business Times reports.

Chief Executive Serena Teo revealed that the divestment translates to “close to S$1 million per key,” presenting a significant premium to the property’s book value. The transaction is anticipated to generate net proceeds of approximately S$138.6 million and a net gain of around S$14.6 million.

With an exit yield of 3.2%, calculated based on CLAS’ FY2023 earnings, this move aligns with the company’s strategy to unlock gains and enhance financial flexibility.

Teo stated that the sale of Citadines Mount Sophia Singapore brings the total divested asset value for CLAS to 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%.

Teo outlined the intended use of the capital 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.”

The market’s response to this development saw stapled securities of CLAS trading at S$0.97, marking a 1% increase during the midday trading break on Friday.

Looking forward, Teo expressed CLAS’s intention to “expand (its) portfolio opportunistically with more yield-accretive assets.”

She said, “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.”

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, stepped forward on the same day to announce its joint venture acquisition of a property at the same address with asset manager BlackRock.

Weave Living’s Founder and Group CEO, Sachin Doshi, disclosed plans for an extensive year-long renovation, with the property slated to reopen under their serviced accommodation brand, Weave Suites, by early 2025./TISG

Read related: CapitaLand Ascott Trust: 16% y-o-y increase in DPS security for FY2023