CapitaLand To Book $43m Gain From Building Sale

Source : The Business Times, September 9, 2008

CAPITALAND will book a gross gain of about $43 million from the sale of Somerset Orchard by its fully owned serviced residences unit The Ascott Group.

Ascott has entered into a conditional sale-and-purchase agreement to sell Somerset Orchard, an 88-unit serviced residence in Orchard Road, for $100 million cash or about $1,530 per square foot to OG Private Limited.

The property is on a site with a remaining lease of 74 years. The carrying value of the property is $57 million.

After the divestment, Ascott will continue to manage the serviced residence for 15 years, with an option to renew the contract for another 10 years. Somerset Orchard is part of Orchard Point, which also includes a four-storey retail podium owned by department store retailer OG.

Ascott made an offer to OG to buy the serviced residence component of the complex in accordance with the right of first refusal granted to OG when the latter bought the retail podium from Ascott in 2001 for $91 million.

Ascott president and CEO Jennie Chua said that the serviced residence chain's presence in Singapore has been enhanced with the recent opening of Ascott Singapore Raffles Place. 'Our new property, Citadines Singapore Mount Sophia, is also scheduled to open in 2009,' she said.

Ascott deputy CEO (finance & investment) Chong Kee Hiong said: 'In line with Ascott's strategy to optimise the use of capital, the proceeds from this divestment will be redeployed to other investment opportunities to enhance our global presence.'

Since the start of this year, Ascott has made strategic investments in Melbourne, Ahmedabad and London.

CapitaLand's second-quarter results announcement last month showed that Ascott posted an 87.3 per cent year-on-year drop in earnings before interest and tax (Ebit) to $17.9 million, while H1 2008 Ebit fell 66.3 per cent to $57.4 million. The Q2 2007 figure included a gain from the sale of Master Golf and Country Club.

The deconsolidation of Ascott Residence Trust, which was listed last year, also contributed to the lower H1 2008 Ebit. However, Ascott's Q2 revenue rose 12.5 per cent to $120.5 million, due largely to serviced residence operations in Europe and China. The group sold $138 million of its serviced residence portfolio in H1 2008 and hinted then that it was looking at further divestments.

Parent CapitaLand, whose first-half net profit declined 49.8 per cent year-on-year to $762.7 million, recently announced deals to sell its stakes in Capital Tower Beijing and Menara Citibank in Kuala Lumpur.