Ascott Residence Trust joins CDL-CapitaLand Consortium to redevelop Liang Court site with partial sale of its GFA for S$163.3 million
Ascott Reit to use net proceeds from divestment to redevelop retained GFA into a new Somerset serviced residence with a hotel licence and refreshed lease of 99 years
Singapore, 21 November 2019 – Ascott Residence Trust (Ascott Reit) will join City Developments Limited (CDL) and CapitaLand Limited (CapitaLand) to redevelop the Liang Court site1 into an integrated development2. Ascott Reit has signed a put and call option agreement with CDL to divest 15,170 square metres (sq m) of the site’s gross floor area (GFA) for Somerset Liang Court Singapore for S$163.3 million3. With net proceeds from the divestment, Ascott Reit will redevelop the retained GFA of 13,034 sq m into a new Somerset serviced residence with a hotel licence. The land’s lease tenure will be refreshed from 57 years to 99 years. Upon completion, the estimated project development expenditure of the new property is approximately S$300 million4.
Ascott Reit is expected to recognise a total divestment gain and fair value gain of S$84.3 million. The divestment price of S$163.3 million is 44% above book value5 and 138% above the acquisition price6. The net divestment gain is S$41.5 million and Ascott Reit is expected to realise a S$42.8 million fair value gain from its retained GFA in the land. Its EBITDA yield7 is estimated to be approximately 4% after the new Somerset serviced residence’s performance stabilises.
Slated to open in 2H 2024, the Somerset serviced residence will offer 192 units8. It will be part of the proposed integrated development with a total GFA of 100,263 sq m, that will also comprise two residential towers, a commercial component and a hotel, subject to approval from the relevant authorities. Upon completion, CDL and CapitaLand’s 50:50 joint venture entities will own the residential and commercial components while Ascott Reit will own the Somerset serviced residence. CDL Hospitality Trusts (CDLHT) will own the hotel under a forward purchase agreement with CDL9. The proposed integrated development is targeted to open in phases from 2024. In line with the government’s plans to enhance the vibrancy of the precinct, the consortium also plans to rejuvenate the river promenade flanking the integrated development. This is expected to generate social activities around the proposed integrated development, increase footfall and improve pedestrian accessibility along the Singapore River.
Located in the heart of Clarke Quay, Singapore’s most popular riverfront lifestyle and entertainment precinct, and on the fringe of the city’s Central Business District, the proposed integrated development is linked to the Central Expressway via River Valley Road. It enjoys excellent accessibility with a direct link to Fort Canning MRT Station and its proximity to Clarke Quay MRT Station. It is connected to an overhead pedestrian bridge that provides direct access to Fort Canning Park.
“This transaction is part of our ongoing strategy to actively reconstitute Ascott Reit’s portfolio to ensure stable returns to unitholders. With the combination of Ascott Reit and Ascendas Hospitality Trust10, we have an enlarged balance sheet that gives us greater capacity to redevelop the property, build our pipeline of quality yield-accretive assets and enjoy potential development gain. There are limited completed and yield-accretive assets in Singapore, one of our top five markets contributing 10% to Ascott Reit’s gross profit11. This will be our second development project. It will allow Ascott Reit to potentially benefit from the development upside and optimise returns for the benefit of its unitholders.”
- Mr Bob Tan, Ascott Residence Trust Management Limited’s (ARTML) Chairman
He added: “Somerset Liang Court Singapore has enjoyed capital appreciation, and a healthy average occupancy rate of about 90%. With revitalisation plans in place for the Singapore River and Clarke Quay precinct and the proposed construction of a new integrated development, it is an opportune time to recycle our capital into redeveloping our ageing property into a new Somerset serviced residence and refresh the land’s lease to 99 years. We will strengthen our presence in a prime location in Singapore’s popular lifestyle hub. We will continue to seek yield-accretive acquisitions, as well as development and conversion projects to maximise returns for unitholders.”
“The new Somerset serviced residence will be part of an iconic riverfront integrated development set to be the next landmark in Singapore. It will offer 192 units, with more efficient layout and room sizes. More than 50% of the units are one- and two-bedroom units, catering to expatriates and business executives on long stays. With a hotel licence, the Somerset property will also have the flexibility to cater to travellers on short stays. It will offer the comfort of a home, apartments with kitchen, quality services and flexibility in the duration of leases.”
- Ms Beh Siew Kim, ARTML’s Chief Executive Officer
Another project that Ascott Reit is developing is the 324-unit lyf one-north Singapore, a coliving property slated to open in 2021. The construction of the Somerset serviced residence and lyf one-north Singapore is within the 10% development limit under Monetary Authority of Singapore’s (MAS) Property Funds Appendix.
With the redevelopment of the Somerset serviced residence mainly funded by net divestment proceeds, there is minimal impact on Ascott Reit’s gearing. As at 30 September 2019, Ascott Reit’s gearing was 33% with a debt headroom of about S$1.1 billion to reach the maximum 45% limit set by the MAS.
Following Ascott Reit’s combination with Ascendas Hospitality Trust, the new combined entity will also own Park Hotel Clarke Quay in the Singapore River precinct alongside the new Somerset serviced residence. In Singapore, besides Somerset Liang Court Singapore and lyf one-north Singapore, Ascott Reit also owns Ascott Orchard Singapore and Citadines Mount Sophia Singapore. Please refer to Annex for more information on Somerset Liang Court Singapore.
View the photo gallery below for more photos of Somerset Liang Court Singapore.
Notes:
[1] Liang Court site comprises Somerset Liang Court Singapore, Liang Court mall and Novotel Singapore Clarke Quay.
[2] The redevelopment of the Liang Court site will follow the proposed sale by CDL Hospitality Trusts (CDLHT) of its total interest in Novotel Singapore Clarke Quay, subject to the approval of CDLHT’s unitholders at its extraordinary general meetings.
[3] Based on existing land lease of 57 years.
[4] Based on land value of S$140.3 million and estimated total redevelopment cost of S$157.3 million (which includes an amount to refresh the lease tenure from 57 years to 99 years).
[5] Based on Somerset Liang Court Singapore’s book value of S$211.0 million as at 30 September 2019.
[6] Based on Somerset Liang Court Singapore’s original purchase price of S$127.5 million at IPO in March 2006.
[7] EBITDA refers to Earnings before interest, tax, depreciation and amortisation. EBITDA yield is based on project development expenditure of approximately S$300 million.
[8] The number of units is subject to change.
[9] Subject to the approval of CDLHT’s unitholders at its extraordinary general meetings.
[10] The combination of Ascott Residence Trust and Ascendas Hospitality Trust is subject to relevant approvals and is expected to complete by end 2019.
[11] Based on Ascott Reit’s 3Q 2019 gross profit.