CCT to divest One George Street into a limited liability partnership and own 50.0% interest thereafter
In line with Trust’s portfolio reconstitution strategy to proactively enhance value and increase financial flexibility
Singapore, 2 May 2017 – CapitaLand Commercial Trust Management Limited (CCTML or the Manager), the Manager of CapitaLand Commercial Trust (CCT or the Trust), is pleased to announce that its trustee, HSBC Institutional Trust Services (Singapore) Limited (Trustee) has established a limited liability partnership, One George Street LLP (OGS LLP), with a joint venture partner, OGS (II) Limited, a special purpose vehicle owned by insurer FWD Group. CCT will hold 50.0% of OGS LLP while the joint venture partner will hold the remaining 50.0%. Concurrently, the Trustee has entered into a sale and contribution agreement with OGS LLP for the sale and contribution of the property known as One George Street to OGS LLP. The transactions are expected to be completed by end June 2017.
The agreed value of One George Street of S$1,183.2 million or S$2,650 per square foot (psf) based on the building’s net lettable area, was negotiated on a willing-buyer and willing-seller basis. This agreed value is 16.7% above the property’s 31 December 20161 valuation of S$1,014.0 million (S$2,271 psf). Based on One George Street’s net property income of S$38.0 million for the 12 months preceding 31 March 2017 and the agreed value, the net property yield translates to 3.2% per annum.
CCT is expected to recognise an estimated gain of S$84.6 million on the divestment of the property on a 50.0% basis. After taking into consideration the estimated transaction and related costs of S$4.9 million, the approximate net gain is S$79.7 million. CCT will continue to own One George Street through its 50.0% interest in OGS LLP. The Manager and CapitaLand Commercial Management Pte Ltd will continue to be the asset manager and property manager respectively.
Ms Lynette Leong, CEO of CCTML said, “The divestment of One George Street to OGS LLP is in line with the Trust’s portfolio reconstitution strategy to proactively enhance the value of CCT’s portfolio and increase our financial flexibility to invest in other compelling and sustainable growth opportunities so as to improve returns to unitholders. By maintaining a 50.0% ownership of OGS LLP, CCT will continue to receive tax transparent income contribution from One George Street, a good quality Grade A office building with a solid tenant profile.”
As OGS LLP is a limited liability partnership, it is tax transparent for Singapore income tax purposes. CCT’s share of income from One George Street through OGS LLP is also tax transparent in the same manner as that prior to the transfer of One George Street to OGS LLP.