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CapitaLand sells 70% interest in Westgate to CMT for S$789.6m

AS part of its capital recycling exercise, property developer CapitaLand on Monday said that it has agreed to sell to CapitaLand Mall Trust (CMT) its 70 per cent stake in Westgate – the retail component of an integrated retail and office development in Jurong - for S$789.6 million.

This values a full 100 per cent stake in the development at S$1.128 billion, and translates to S$2,746 per square foot (psf).

The sale will generate for CapitaLand proceeds of about S$397.6 million in cash - comprising S$17.9 million in purchase consideration, and S$379.7 million as repayment of unitholders’ loans owed by the trust that holds the mall to the trustee and the vendors. The remaining portion of S$392 million makes up 70 per cent of the trust's bank loans owed to financial institutions.

CapitaLand said it will net a gain of about S$99.2 million from the sale. The transaction, which is conditional on CMT unitholders’ approval, is expected to be completed in the fourth quarter of this year. CMT currently holds the balance 30 per cent, so the transaction will increase its interest in Westgate to 100 per cent.

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Lim Ming Yan, president and group CEO of CapitaLand, said: “The divestment of Westgate to CMT allows us to realise the property’s investment value, thus enhancing our financial flexibility as we redeploy our capital into higher yielding investments. Having achieved our annual capital recycling goal of S$3 billion in H1 2018, we continue to actively seek opportunities to reconstitute our portfolio.”

Within the last three months, the developer had announced acquisition of three sites – a site in Sengkang Central together with City Developments in Singapore, and two sites in China in Guangzhou and Chongqing respectively – valued at a total of S$1.65 billion.

CapitaLand Mall Trust Management said the total acquisition outlay may be financed through debt or a combination of debt and equity, depending on market conditions; an acquisition fee of S$7.9 million will also be paid in units to the manager.

As at end-July 2018, Westgate has a committed occupancy of 98 per cent. Opened in December 2013, Westgate’s annual shopper traffic hit a record 49.4 million in 2017.

Post divestment, CapitaLand will continue to benefit from Westgate’s stable yield through CapitaLand’s stake in CMT. The mall will also continue to be managed by CapitaLand Retail, the group’s wholly-owned retail operating platform.

Tony Tan, CEO of the manager, said: “(The proposed acquisition) enables us to recycle the capital from the sale of Sembawang Shopping Centre (which was sold for S$248 million in June this year) into a newer asset with stronger growth potential at an entry yield of 4.3 per cent, which is in line with recent market transactions.”

He added that the transaction would increase the proportion of CMT’s portfolio focused on necessity shopping – which has shown resilience over the years – from 79.1 per cent to 80.3 per cent.

Shares of CapitaLand and CMT added four cents to S$3.40 and added one cent to S$2.17 respectively.