Ascott Reit sells Raffles Place property for S$134m net gain

Singapore

PRIVATE investor Cheong Sim Lam, whose family developed International Plaza and the Hyatt Regency Singapore, snapped up Ascott Reit's serviced apartment building Ascott Raffles Place Singapore for S$353.3 million.

The sale price is some 64.3 per cent above the property's latest valuation of S$215 million as at Dec 31 2018. After accounting for transaction related expenses, Ascott Reit is expected to realise an estimated net gain of S$134 million.

The sale comes after several potential buyers made unsolicited offers last year for the property, as previously reported by The Business Times. Following that, Cushman & Wakefield conducted an expression of interest exercise. It brokered Wednesday's deal.

The 999-year, 20-storey conserved building at 2 Finlayson Green was formerly known as Asia Insurance Building. It is zoned commercial and has a gross floor area of 168,952 sq ft with 146 serviced apartments.

The Art Deco-style building, designed by architect Ng Keng Siang, was the tallest in South-East Asia when it was completed in 1955.

Mr Cheong himself developed several residential projects like Robinson Suites on Robinson Road and previously owned 137 and 139 Cecil Street.

Asked about Mr Cheong's plans for the building and whether Ascott will continue to manage it, executive director of capital markets for Cushman & Wakefield Shaun Poh said the purchase is for "long-term investment".

Ervin Yeo, regional general manager for Singapore, Malaysia and Indonesia for the Reit's sponsor The Ascott Ltd told BT: "We are in active discussion with the buyer to continue to manage Ascott Raffles Place Singapore."

The Ascott, through its serviced residence global fund with the Qatar Investment Authority, has invested in the serviced residence component of the Funan integrated development. lyf Funan Singapore is slated to open in the second half of 2019.

There will also be a 299-unit Citadines serviced residence at the integrated development CapitaSpring, which is being built on the site of the former Golden Shoe Car Park in the Central Business District (CBD). It will be managed by The Ascott and is slated to open in 2021.

The net sale proceeds from Wednesday's sale may be used to pare the debts of Ascott Reit, fund potential acquisitions and/or for other general corporate purposes, Ascott Reit's manager said in a Singapore Exchange (SGX) filing.

It said Ascott Raffles Place accounts for 3 per cent of Ascott Reit's gross profit for the nine months ended 30 September 2018, but its sale is not expected to have a material impact on Ascott Reit's financial performance.

Beh Siew Kim, chief executive officer of Ascott Reit's manager, said in the statement: "The sale will give us the financial flexibility to recycle capital and invest in higher-yielding properties. We may also use the sale proceeds to pay down debt which will then increase our debt headroom for potential acquisitions of quality assets or to develop our own properties such as lyf one-north Singapore to enhance Ascott Reit's portfolio."

Ascott Reit closed unchanged on Wednesday at S$1.10, before the announcement was made.