CapitaLand Mall Trust (CMT) has sold the Sembawang Shopping Centre for S$248 million ($189 million), generating a net gain for the Singapore-listed real estate trust of S$119.6 million ($91 million), according to a statement to the stock exchange on Thursday.
The 143,631 square foot (13,343 square metre) mall in Sembawang township, just across the Straits of Johor from Malaysia, was sold to a joint venture between Singapore developer Lian Beng Group and Apricot Capital, the private investment company owned by the Teo family that controls food processing powerhouse Super Group.
CapitaLand Trust Achieves Nearly Double the Asset’s Valuation
With Sembawang Shopping Centre valued at S$126 million as at 2017 year-end, CapitaLand Mall Trust was able to bring in almost double that valuation through the successful project sale. Lian Beng, part of the joint venture that purchased the shopping centre said its bid took into account the current market conditions and the market prices of properties in the area, according to a stock exchange filing by Lian Beng Group.
“Considering that Sembawang Shopping Centre is a 999-year leasehold property, we think that the purchase price in per square foot (per square foot) is reasonable,” Ong Pang Aik, executive chairman of the developer said, as cited by the Straits Times.
The Lian Beng-Apricot Capital joint venture’s purchase price is equivalent to S$1,727 per square foot of net lettable area. They plan to make use of the mall for property investment purpose, or recurring rental collection.
Located at the northern tip of Singapore near Yishun and Sembawang MRT stations, Sembawang Shopping Centre reopened to shoppers in 2008 following CapitaLand’s acquisition in 2005. It comprises four levels of retail space with a net lettable area of 143,631 square feet. The community mall had an occupancy rate of 99.4 percent as at 2017 year-end, with supermarket Giant, a Yamaha Music School and the Food Junction food court among its major tenants.
Suburban Retail Gets Hot
The sale comes as suburban retail in Singapore shows signs of growth. The vacancy level in suburban retail properties decreased by 0.7 percentage point quarterly to 6.3 percent in the fourth quarter in 2017, a March report from Savills shows. Shop rents in the city’s suburban areas also rose 2.1 percent year on year to an average S$28.80 per square foot in the period. Rental rates are now at their highest levels since 2015, due to higher rents fetched in newly renovated malls and in those with high visitor traffic, said Savills.
“There is strong interest and healthy appetite among both local and regional investors for Singapore suburban retail properties that offer stable recurring income,” said Terence Tang, Managing Director of Asia Capital Markets & Investment Services at Colliers International, the sale agent for CapitaLand in a statement. “Sembawang Shopping Centre also offers inherent investment potential that will benefit from the future growth of the surrounding precinct.”
Business as Usual for CapitaLand Mall Trust
The management of the $5.8 billion retail trust characterised the disposal as part of their ongoing mission to generate profits to be shared with unit-holders. “The divestment of Sembawang Shopping Centre is in line with our portfolio management strategy of maximising returns for our unitholders. By unlocking the value of Sembawang Shopping Centre at this stage, it will realise the optimal value for CMT’s unitholders,” said Tony Tan, CEO of CapitaLand Mall Trust Management.
Following the mall sale, CMT’s management foresees little change to their operation. “As the mall accounts for only about 1% of CMT’s total asset value, its sale will have minimal impact on CMT’s financial performance and distribution per unit. The net proceeds from the divestment will further enhance and strengthen CMT’s financial flexibility.”
Lian Beng Buys Again From CapitaLand
CMT’s partner in the Sembawang Shopping Centre deal, homegrown developer Lian Beng, has previous experience buying retail assets from the CapitaLand Group. In July last year Lian Beng bought the 12-storey Wilkie Edge integrated complex from CapitaLand Commercial Trust for S$280 million.
Completed in 2008, Wilkie Edge has a net lettable area of 154,528 square feet and was fully occupied as of March 2017, with tenants like Kaplan Learning Institute and Tower Research Capital, a financial services firm.