Ascott Residence Trust to sell Somerset Xu Hui Shanghai above book value

ASCOTT Residence Trust (ART) has agreed to sell Somerset Xu Hui Shanghai at an aggregate value of 1.05 billion yuan (S$215.6 million) to an unrelated third party.

Somerset Xu Hui Shanghai is a 32-storey serviced apartment building with a five-storey commercial podium and a basement car park. The property's agreed value is 171 per cent above its book value, said the managers in a pre-market filing on Tuesday.

ART is expecting to net a gain of 536.6 million yuan from the sale, which is slated to take place in Q2 2021. Estimated net proceeds of about 944.6 million yuan may be used to pare down the debts of ART, fund potential acquisitions or for other general corporate purposes, said the managers in its filing.

Due to the ongoing Covid-19 situation in China and strict government regulations to cool the country's property market, ART's managers said it sees limited operational growth prospects and capital appreciation upside to the property.

Somerset Xu Hui Shanghai's sale therefore presents an opportunity to unlock the asset's underlying value and redeploy the proceeds in higher yielding assets to enhance the returns of ART's portfolio, they added.

For illustration purposes, the trust would have booked a FY2020 distribution per stapled security (DPS) of 2.94 Singapore cents as opposed to 3.03 cents had the transaction completed on Jan 1, 2020.

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Its net asset value (NAV) for the financial year would have been S$3.7 million rather than S$3.6 million, which translates to an FY2020 NAV per stapled security of S$1.18 instead of S$1.15.

In 2020, ART sold its Ascott Guangzhou in China and Citadines Didot Montparnasse Paris in France for a total of S$191.4 million.

The trust last reported a DPS of 1.99 Singapore cents for the half-year ended Dec 31, 2020, representing a 52 per cent decline from its DPS of 4.18 cents a year ago.

Stapled securities of ART closed S$0.02 or 2 per cent higher at S$1.02 on Tuesday.