ESR-Reit is divesting its properties at 11 Serangoon North Avenue 5 and 3C Toh Guan Road East for S$53 million, the Reit manager said on Wednesday.
The price is a 5 per cent premium to the properties' total fair value of S$50.5 million as at Dec 31, 2020, and a 7.1 per cent premium to their total acquisition price.
The net proceeds will be used to repay outstanding borrowings and/or fund upcoming asset enhancements, potential acquisitions, unit buy-back and / or general working capital requirements, said ESR Funds Management.
If fully used to repay outstanding borrowings, the proceeds would reduce ESR-Reit's pro forma gearing to 40.9 per cent from 42 per cent as at March 31, 2021.
The divestment is expected to be completed in the second half of this year, or as soon as JTC Corporation grants the necessary approval for the proposed sale.
Said Adrian Chui, chief executive officer and executive director of the Reit manager: "This divestment is in line with our ongoing portfolio optimisation strategy to monetise non-core assets, which can be channelled towards value creation opportunities."
He added that the divestment will improve the quality of ESR-Reit's portfolio and optimise returns for unitholders.
The property in Serangoon North Avenue 5 is a six-storey multi-tenanted general industrial building in the Ang Mo Kio Industrial Estate. It has a remaining land lease tenure of 36.3 years and a gross floor area (GFA) of 146,619 square feet (sq ft).
The property in Toh Guan Road East is a five-storey multi-tenanted warehouse in Toh Guan Logistics Park. It houses ancillary office space, and has a remaining land lease tenure of 30.1 years and GFA of 192,864 sq ft.
Following the divestment, ESR-Reit's portfolio will consist of 55 properties across Singapore, with a total GFA of approximately 14.8 million sq ft.
ESR-Reit units closed at S$0.415 on Wednesday, up 0.5 Singapore cent or 1.22 per cent.