CapitaLand is one of Asia's largest real estate companies. Headquartered and listed in Singapore, the company's core businesses in real estate, hospitality and real estate financial services are focused in growth cities in Asia Pacific and Europe.
- Acquires Somerset Grand Cairnhill for S$359mn from ART, for redevelopment into an integrated development
- Divests 2 stabilized serviced residences to ART for 283.3mn.
- We estimate the deal to be accretive to Capl
- Maintain Accumulate
What is the news?
CapitaLand (Capl) is acquiring Somerset Grand Cairnhill Singapore from Ascott Residence Trust (ART) at S$359mn for redevelopment into an integrated development comprising a serviced residence with a hotel license and a high-end residential for sale. At the same time, Capl will divest Ascott Raffles Place Singapore and Ascott Guangzhou to ART for S$283.3mn with net gain of
S$98.9mn is expected (including S$42.7mn from the share of ART’s gain). Capl will enter into a conditional agreement to divest the eventual new serviced residence to ART for S$405mn and the property is expected to be delivered to ART by 2017.
How do we view this?
The acquisition of SGCS is very much anticipated by the market since the relevant redevelopment approvals were obtained in July 2011. We opined that the transaction is positive to Capl as it could capture the redevelopment gain of the site from sale of residential units, plus a certain exit avenue and price for the redeveloped serviced residence. We estimate the transactions could add ~2.3cents to the FY12 EPS, and ~1.7cents to its RNAV.
Investment Actions?
We factor in the changes from the above transactions and include our higher RNAV estimate for CMA following our recent Update Report, fair value of Capl is thus increased from $2.98 to $3.03, pegged to the same 20% discount to RNAV. Maintain Accumulate.
Redevelopment plan of Cairnhill site
The Cairnhill site, which is situated in the heart of Orchard Road, had been granted redevelopment permissions for 40% hotel use and 60% residential use. The proposed serviced residence component will feature a 20-storey development with estimated 371 units of serviced residences and GFA of 17,333sm. The residential component is estimated to yield 200-250 units of high-end residential for sale with GFA of 25,999sqm. The relevant premiums required to top-up the lease to a fresh 99 year leasehold and intensify the use of site is estimated to cost $160-$180mn by the management. TDC for the site is around $1bn, or $2,144psf per plot ratio. The agreed sale price of the new serviced residence of $405mn represents $2,171psf, which implies future development profits will mainly come from sale of the residential component. Based on transaction prices of Urban Resort Condominium, a development across the street which is being developed by Capl, launch price of $2,800psf is achievable for the planned residential units. The management expects to launch the development for sale in 2013.
As part of the deal, Capl will divest 2 stabilized assets, Ascott Raffles Place Singapore and Ascott Guangzhou to ART for S$283.3mn and lease back by its serviced residence operator The Ascott Ltd on Master Lease, net gain of S$51.4mn is expected as a result.
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