ESR-Reit sells 8 Singapore assets to Brookfield for S$338.1 million; sale would trim distribution
The move is part of Reit’s strategy to offload non-core assets, particularly those suffering lease decay
[SINGAPORE] The manager of ESR Real Estate Investment Trust (ESR-Reit) on Monday (Dec 15) has signed a deal to divest eight non-core Singapore assets for S$338.1 million as part of its ongoing portfolio rejuvenation and capital-recycling efforts.
The sale to unrelated third parties represents a 2 per cent premium to the independent valuation of the properties as at Nov 30, and is expected to lower distribution. The buyers are managed by affiliates of Brookfield Asset Management.
“By realising value from non-core assets, we continue to reduce the impact of land lease decay on our net asset value,” said Adrian Chui, CEO and executive director of the manager.
The properties at 46A Tanjong Penjuru, 86 and 88 International Road, 120 Pioneer Road, 21 and 23 Ubi Road 1, 24 Jurong Port Road, 13 Jalan Terusan, 60 Tuas South Street 1, and 43 Tuas View Circuit have a remaining weighted average leasehold of 22.4 years as at Sep 30, 2025.
“Through enhancing our balance sheet strength, ESR-Reit is better positioned to pursue new, value-accretive new economy opportunities though asset enhancement initiatives, redevelopments and acquisitions,” added Chui.
Four of the properties to be divested have land leases of about 13 years or less. The manager said that the divestment will “meaningfully reduce ESR-Reit’s exposure to such assets with short land lease tenures”.
Had the divestments been completed by Sep 30, the Reit’s portfolio’s weighted average remaining land lease would have improved from 43.3 years to 44.8 years. The weighted average lease expiry would have increased from 4.1 years to 4.3 years.
For the Singapore portfolio specifically, weighted average remaining land lease would have improved from 31 years to 31.8 years.
ESR-Reit’s manager added that 13.2 per cent of the Reit’s portfolio comprises assets with remaining land leases of less than 15 years as at Sep 30. Upon completion of the proposed divestment, this proportion is projected to shrink to 11.8 per cent of the portfolio.
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Pro forma estimates
If the divestment had been completed on Jan 1, 2024, the Reit’s distribution per unit for the 2024 financial year would have dropped 4.1 per cent, from S$0.2119 to S$0.20323.
Assuming all net proceeds were used to repay existing debt, ESR-Reit’s pro forma aggregate leverage as at the end of 2024 would have fallen from 42.8 per cent to about 39.2 per cent. This would improve ESR-Reit’s pro forma debt headroom from S$790.2 million to about S$1.1 billion, providing “substantial financial flexibility” to pursue yield-accretive investment opportunities, said the manager.
In addition, ESR-Reit’s pro forma interest coverage ratio for the trailing 12 months as at Dec 31, 2024, would have improved from 2.5 times to 2.6 times, further strengthening the Reit’s capital structure.
The net asset value per unit would be unaffected at S$2.75.
Units of ESR-Reit rose 0.7 per cent to close S$0.02 up at S$2.74 on Friday.
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