Ascott Residence Trust has sold the Ascott Raffles Place Singapore to a local private investor for S$353.3 million, according to a filing by the REIT’s manager to the Singapore Exchange last week, parting with one of the most recognisable properties in the listed trust’s portfolio of serviced residences.
The sale price for the 20-storey historic property is some 64.3 percent above a valuation of S$215 million completed on December 31st, and after accounting for transaction related expenses, Ascott REIT says it expects to realise an estimated net gain of S$134 million on the disposal. The deal is expected to be completed in May this year.
The buyer of the 999-year leasehold asset has been revealed as Singaporean property tycoon Cheong Sim Lam, executive director and chief investment officer of Hong Kong-listed Associated International Hotels, and a director of Hong Kong-listed Tian Teck Land, whose family has long been a significant investor in Singapore and whose half-brothers were once known as the kings of Hong Kong industrial buildings.
Selling a Historic Property to Raise Cash
Located at 2 Finlayson Green and a stone’s throw from the Raffles Place MRT Station, Ascott REIT purchased the 146-unit Ascott Raffles Place from its affiliated development and operation division, Ascott Ltd, for S$220 million in 2012. Both Ascott Ltd and Ascott Residence Trust Management Limited, which manages Ascott REIT, are direct subsidiaries of governement-linked real estate giant CapitaLand.
Ascott Raffles Place had started life in 1955, as the Asia Insurance Building, when it was the tallest building in Southeast Asia. Ascott had remodelled the tower, which measures 15,696 square metres (168,950 square feet) by gross floor area, in 2008.
In its statement, Ascott Residence Trust Management Limited said that the net proceeds of the sale, which was brokered by Cushman & Wakefield, may be used to pare down Ascott REIT’s debt, fund potential acquisitions and/or for other general corporate purposes.
“The sale will give us the financial flexibility to recycle capital and invest in higher-yielding properties,” said Beh Siew Kim, chief executive officer of Ascott REIT’s manager, in the statement. “We may also use the sale proceeds to pay down debt which will then increase our debt headroom for potential acquisitions of quality assets or to develop our own properties such as lyf one-north Singapore to enhance Ascott REIT’s portfolio.”
Ascott Raffles Place accounted for three percent of Ascott REIT’s gross profit for the nine months ended September 30, 2018. Its sale is not expected to have a material impact on the financial performance of the S$5.3 billion listed vehicle.
Cheong Family Buys Near Raffles Place
Private investor Cheong Sim Lam, whose family developed International Plaza and the Hyatt Regency Singapore, previously also owned both 137 and 139 Cecil Street in the city. Cheong sold 139 Cecil Street in downtown Singapore, formerly known as the Aviva building, to a buyer from Shanghai with the family name Zhou for more than S$210 million ($150 million) in 2015. In October of this year, Hong Kong-based co-working operator Campfire leased all 16 floors of 139 Cecil for its debut location in Singapore.
In Hong Kong, the Cheong family’s Associated International Hotels owns iSQUARE in Tsim Sha Tsui, a 31-storey shopping complex located on the site of the former Hyatt Regency Hotel. The hotel had been the family’s flagship property in Hong Kong, when the Chung brothers — half-brothers of Cheong Sim Lam — were among the city’s most aggressive developers in the 1960s. The company also owns the Good Luck Industrial Building in the city’s Kwun Tong area, as well as a floor in the Euro Trade Center on Connaught Road in Central.
Cheong Sim Lam is a brother of Cheong Hooi Hong, the present chairman of both Associated International Hotels and Tian Teck.
Ascott REIT Keeps Set of Three Local Properties
Following the disposal by Ascott REIT, the listed trust will still retain the Ascott Orchard Singapore, Citadines Mount Sophia Singapore and Somerset Liang Court Singapore as its operational local assets. The REIT manager also acquired a prime greenfield site for S$62.4 million to build the first co-living property, lyf one-north, in Singapore’s research and innovation business hub, one-north, Nepal Hill. The 324-unit property targets to open in 2021.
The Singapore-listed Ascott REIT invests primarily in income-producing serviced residences, rental housing properties and other hospitality assets.