Capitaland Ltd.

02/09/2024 | Press release | Distributed by Public on 03/09/2024 06:49

CICT to acquire a 50.0% interest in ION Orchard, Singapore's iconic premium destination mall, for S$1.85 billion

  • Proposed acquisition expected to deliver immediate DPU accretion and further strengthen CICT's market leadership in Singapore

Singapore, 3 September 2024 - Singapore's first and largest diversified real estate investment trust, CapitaLand Integrated Commercial Trust (CICT), has entered into an agreement with its sponsor, CapitaLand Investment Limited (CLI) to acquire a 50.0% interest in ION Orchard1 at an agreed property value of S$1,848.5 million2, negotiated on a willing-buyer and willing-seller basis. This proposed acquisition of an iconic premium destination mall is expected to enhance the resilience of its high-quality and diversified portfolio of retail and office properties and integrated developments, as well as augment CICT's leading position as the largest owner of Singapore's private retail stock.

The agreed property value is within the range of two independent valuations3 of ION Orchard, separately commissioned by the trustee and the manager of CICT (CICTML). On a pro forma basis, assuming CICT had held and operated ION Orchard from 1 January to 30 June 2024, the distribution per unit (DPU) accretion is expected to be 0.9%4.

Ms Teo Swee Lian, Chairman of CICTML, said: "The opportunity to acquire ION Orchard, a highly sought-after premium destination mall, helps deepen our presence in Singapore. Sited in a prime location with excellent accessibility, ION Orchard is known for its iconic architectural façade and universal appeal, due to its diverse range of offerings attracting millions of locals and visitors annually. 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. Marking a significant stride forward in delivering CICT's growth strategy, this proposed acquisition will consolidate CICT's downtown presence across major transport nodes and shopping areas, spanning Orchard Road, Dhoby Ghaut and City Hall, in a retail property market with limited supply."

Ms Teo Swee Lian, Chairman of CICTML
Mr Tony Tan, CEO of CICTML

Mr Tony Tan, CEO of CICTML, said: "This acquisition of ION Orchard is a transformational move in our strategy to build a resilient, quality and Singapore-focused diversified portfolio that can deliver sustainable returns to unitholders across different market cycles. ION Orchard has close to 300 international and local brands, ranging from luxury to necessity trades, across eight storeys of retail space. The diverse trade mix will enable CICT 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. 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. Upon unitholders' approval, we expect the proposed acquisition to be completed in 4Q 2024."

Mr Tan added, "We are excited to collaborate closely with our joint venture partner, Sun Hung Kai Properties, and we look forward to continue delivering exceptional shopper experiences, driving operational excellence, and unlocking more growth potential for ION Orchard."

ION Orchard Link, an underground pedestrian link with retail offerings, is a vital connection that links ION Orchard to the other parts of Orchard Road.

The Property

ION Orchard is an eight-storey iconic premium destination mall located at the gateway of Singapore's renowned Orchard Road. With a net lettable area of approximately 623,600 square feet, it is home to a diverse mix of nearly 300 international and local brands across the luxury and non-discretionary retail segments. In addition, the mall offers unique and multi-sensory experiences via the ION Art Gallery and ION Sky. Beyond a curated selection of popular retail and epicurean options, the mall boasts an expansive food hall presenting an array of local and international culinary delights. Integrated with a 56-storey condominium, The Orchard Residences, ION Orchard is seamlessly connected via sheltered access to the Orchard mass rapid transit (MRT) interchange station which serves the North-South Line and the Thomson-East Coast Line, as well as ION Orchard Link, an underground pedestrian link with retail offerings. ION Orchard Link is a vital connection that links ION Orchard to the other parts of Orchard Road.

Total acquisition outlay and method of financing

The total acquisition outlay is approximately S$1,101.3 million, which comprises the estimated purchase consideration and other transaction-related expenses. Subject to completion adjustments, the estimated purchase consideration takes into account, amongst other things, 50% of the agreed property value and agreed value of the property manager, as well as other net assets, and adjustment for 50% of the secured bank loan taken out by ION Orchard.

CICT intends to finance the total acquisition outlay (save for the acquisition fee to be paid in CICT units) from the net proceeds to be raised from an equity fund raising. The equity fund raising comprises a private placement and a pro-rata and non-renounceable preferential offering announced on 3 September 20245. CICT's sponsor, CLI, has provided an irrevocable undertaking to fully subscribe to its entitlement under the preferential offering.

Post acquisition, the aggregate leverage of CICT is expected to remain at about 40%.

Approvals required

As CLI is a controlling unitholder of CICT, the proposed acquisition is an interested person/party transaction (IPT) under the Listing Manual of Singapore Exchange Securities Trading Limited (SGX) and the Property Funds Appendix of the Code of Collective Investment Schemes. As the value of the proposed acquisition exceeds 5% of CICT's latest audited net tangible assets, the proposed acquisition will be subject to the approval of CICT's unitholders at an extraordinary general meeting to be convened, further details of which will be provided in due course.

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1. Includes ION Orchard, ION Orchard Link, ION Art Gallery and ION Sky.
2. Based on the agreed property value and the annualised gross revenue for the first half of 2024, the gross yield of the proposed acquisition is approximately 7.1%.
3. As at 31 July 2024, independent valuations by Cushman & Wakefield VHS Pte. Ltd. (appointed by the trustee of CICT) and Savills Valuation and Professional Services (S) Pte Ltd (appointed by CICTML) have valued ION Orchard at S$3,690.0 million and S$3,715.0 million respectively.
4. Based on 1H 2024 DPU of 5.43 cents and assuming the proposed acquisition had been completed on 1 January 2024. On a pro forma basis, assuming CICT had held and operated ION Orchard for the financial year ended 31 December 2023, the DPU accretion is expected to be approximately 1.2%..
5. Please refer to the separate announcement dated 3 September 2024 titled "Launch of Equity Fund Raising to Raise Gross Proceeds of No Less Than Approximately S$1.1 Billion" for more details.

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