Cicts Manager Proposes Acquire Ion Orchard 185 Billion Subject Egm
CapitaLand Integrated Commercial Trust’s (CICT) manager has announced on Sept 3 their proposal to acquire a 50% stake in ION Orchard for $1,848.5 million. The acquisition will be made by CapitaLand Investment (CLI) selling its current 50% interest in the property to CICT. Sun Hung Kai Properties holds the remaining 50% in a joint venture.
The agreed price for ION Orchard is within the range of two independent valuations that were commissioned by the trustee and manager of CICT. On a pro forma basis, assuming CICT had owned and operated ION Orchard from January 1 to June 30, the expected distribution per unit (DPU) accretion will be 0.9%.
ION Orchard is a well-known property with a gross yield of 7.1%, based on the agreed price and 1HFY2024 annualised gross revenue according to a presentation by CICT. To fund the acquisition, CICT’s manager plans to raise $1.1 billion through a combination of a placement and preferential offer to unitholders. The placement will consist of 171,737,000 new units to be offered to institutional and other investors for $350 million, at an issue price between $2.038 and $2.091 per unit. The preferential offer will have 377.3 million new units at an issue price of $2.007 per unit, in the ratio of 56 preferential offering units for every 1,000 existing units held by eligible unitholders, raising $757.2 million.
The Urban Redevelopment Authority (URA) has big plans for Tampines that go beyond just residential and commercial development. The area’s educational and healthcare facilities will also see significant improvements and additions. This includes upgrades and new resources for all levels of education, from primary schools to tertiary institutions, to meet the needs of the growing population and maintain high educational standards. These enhancements are crucial for families who are considering Tampines as their home. Additionally, there will be upgrades to existing hospitals and clinics to ensure that residents have access to top-notch medical care. The latest addition to Tampines, Aurelle of Tampines at Tampines North, will also benefit from these developments, providing its residents with convenient access to excellent educational and healthcare facilities. With Aurelle of Tampines at Tampines North, residents will have the best of both worlds – a well-developed community with top-notch amenities.
The acquisition will require the approval of CICT’s unitholders at an extraordinary general meeting to be convened. CICT had a DPU of 5.43 cents in the 1HFY2024, resulting in an annualised DPU yield of 5.1%. After the acquisition, the pro forma aggregate leverage will slightly increase to 39.9%.
CICT’s chairman, Teo Swee Lian, stated that they are well-positioned to take advantage of the increasing tourist arrivals and rising retail rents in Orchard Road. The ongoing rejuvenation of Orchard Road is also expected to give the property more potential for growth. CICT’s manager CEO, Tony Tan, also believes that the acquisition will strengthen their position as a proxy for high-quality Singapore commercial real estate, creating more value for unitholders. Tan also said that they will work closely with Sun Hung Kai Properties to continue delivering exceptional shopper experiences, driving operational excellence, and unlocking more growth potential for ION Orchard.
Assuming unit holders approve the acquisition, it is expected to be completed in the 4Q of 2024.
