CAPITALAND Integrated Commercial Trust (CICT) is proposing to acquire a 50 per cent interest in Ion Orchard and its connecting underpass, Orchard Link, from its sponsor CapitaLand Investment (CLI).
Based on 50 per cent of the agreed property value, which amounts to S$1.85 billion, the total acquisition outlay is estimated to stand at S$1.1 billion after also factoring in transaction-related expenses, as well as adjustments for 50 per cent of a secured bank loan taken out by Ion Orchard.
On Tuesday (Sep 3), CICT said it intends to finance the transaction with net proceeds from a private placement and pro-rata non-renounceable preferential offering to raise gross proceeds of at least S$1.1 billion.
The issue price for both parts of the fundraising exercise is estimated to fall between S$2.038 and S$2.091 for each private placement unit, and S$2.007 for each preferential unit.
CLI has provided an irrevocable undertaking to fully subscribe to its entitlement under the preferential offering.
Tony Tan, chief executive of CICT’s manager, expects the proposed acquisition to be completed in Q4 of 2024, assuming unitholders vote to approve the deal.
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Tan said the transaction is a “transformational move” in CICT’s strategy, and will pave the way for a diverse trade mix that will enable the trust to “capture the luxury retail segment in Singapore, leveraging the spending power of domestic and international consumers, while benefitting from resilient spending on necessity goods and services across economic cycles”.
The acquisition is expected to be immediately accretive to CICT’s distribution per unit (DPU).
Assuming that CICT had held and operated Ion Orchard from Jan 1 to Jun 30, 2024, CICT’s H1 FY2024 DPU would have been S$0.0548 instead of S$0.0543 – representing DPU accretion of 0.9 per cent.
“This DPU-accretive acquisition will further strengthen CICT’s market position as the proxy for high quality Singapore commercial real estate, creating greater value for our unitholders,” added Tan.
Separately, CLI’s group chief executive Lee Chee Koon said the company’s divestment of Ion Orchard to CICT is testament to CLI’s “strong sponsor support” for CICT.
Divestment proceeds will be used to further diversify CLI’s portfolio across geographies and asset classes, as well as establish new fund products to boost the group’s fee-related income, he added.
“This transaction also demonstrates the disciplined execution of our asset-light strategy to recycle quality assets from our balance sheet and grow CLI’s funds under management,” said Lee.
Ion Orchard is currently held in CLI’s 50:50 joint venture with Sun Hung Kai Properties, a property developer and operator in China.
The eight-storey mall has a total net lettable area of about 57,935 square metres (sq m) and a committed occupancy rate of 96 per cent as at end-June 2024.
Shares of CLI closed Monday S$0.02 or 0.7 per cent lower at S$2.69, while CICT units were up S$0.01 or 0.5 per cent to S$2.13 before the trust requested a trading halt on Tuesday morning.
