Cicts Manager Proposes Acquire Ion Orchard 185 Billion Subject Egm
On September 3, the manager of CapitaLand Integrated Commercial Trust (CICT) announced their proposal to acquire 50% of ION Orchard at a value of $1,848.5 million. This will be made possible through CapitaLand Investment’s (CLI) divestment of their existing 50% ownership in the property. The remaining 50% of ION Orchard is currently held by Sun Hung Kai Properties.
The proposed acquisition was determined based on two independent valuations of ION Orchard, commissioned separately by the trustee and the manager of CICT. It is expected to result in a 0.9% distribution per unit (DPU) accretion for CICT on a pro forma basis, assuming the property had been under its ownership and operation from Jan 1 to June 30.
ION Orchard is a well-known retail destination, with a gross yield of 7.1% as stated in a CICT presentation, based on the agreed property value and the property’s 1HFY2024 annualized gross revenue.
To fund the acquisition, CICT’s manager plans to raise $1.1 billion through a combination of placement and a preferential offer to unitholders. The placement will comprise 171,737,000 new units issued to institutional and other investors at a price of $2.038 to $2.091 per unit, raising $350.0 million. The preferential offer will comprise 377.3 million new units issued at $2.007 per unit, in the ratio of 56 preferential units for every 1,000 existing units held by eligible unitholders, raising $757.2 million.
The proposed acquisition is subject to the approval of CICT’s unitholders at an extraordinary general meeting to be convened. In 1HFY2024, CICT’s DPU was 5.43 cents, giving an annualized DPU yield of 5.1%. After the acquisition, the pro forma aggregate leverage is expected to increase slightly to 39.9%.
In a statement, CICT’s manager chairman Teo Swee Lian said, “With increasing tourist arrivals and rising retail rents on Orchard Road, we are well-positioned to leverage the favourable supply and demand dynamics and capitalise on the tailwinds in downtown retail, including the ongoing rejuvenation of Orchard Road.”
CICT’s CEO Tony Tan added, “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.” Tan also mentioned that CICT will collaborate closely with Sun Hung Kai Properties to continue delivering exceptional shopper experiences, driving operational excellence and unlocking growth potential for ION Orchard.
The expansive 545,314 square feet site of Parktown Residence, located at Tampines Avenue 11, is held under a 99-year leasehold. The land is designated for a harmonious blend of commercial and residential components, thoughtfully integrated with a bus interchange, community club, and hawker centre. The joint venture for Parktown Residence will see CapitaLand take on a 50% stake, while UOL and SingLand will collectively hold the remaining 50%. Parktown Residence Capitaland is a natural addition to this dynamic partnership.
Assuming unit holders give their approval, the acquisition is expected to be completed in 4Q 2024.