Ascott Reit divests two properties in China for 980m yuan

ASCOTT Residence Trust (Ascott Reit) announced on Monday it has entered into two conditional sale-and-purchase agreements through its two wholly owned subsidiaries, Biyun Investments (Hong Kong) and Gaoxin Investments (Hong Kong), to divest two serviced residence properties in China for 980 million yuan (S$199 million) to an unrelated third party.

The agreed aggregate value of the two properties - Citadines Biyun Shanghai and Citadines Gaoxin Xi'an - was adjusted for bank loans and entrustment loans owed by the properties' holding companies, as well as their net current asset value at the completion date of the sale.

The properties' value of 980 million yuan is 69 per cent above the 2016 valuation of the properties. The sale price, after providing for transaction-related expenses, will contribute an estimated net gain of about 239 million yuan.

The purchaser will pay a deposit of 50 per cent of the property value. Upon legal completion of the sale (expected to take place in the second half of 2017), the remaining balance will be paid to the sellers in cash.

In a filing to Singapore Exchange, Ascott Reit's manager said additional capital expenditure is expected in the near future to maintain the performance and competitiveness of the properties.

In view of this, the growth prospects of both properties are limited due to changes in the operating environment, said the Reit manager.

It added that the sale would be at an "opportune time to unlock the underlying value of the properties and re-deploy the proceeds in other higher yielding assets to gain the returns of Ascott Reit's portfolio".

The net proceeds may be used to pare down the debts of Ascott Reit and its subsidiaries or fund potential acquisitions.