Cicts Manager Proposes Acquire Ion Orchard 185 Billion Subject Egm
On September 3, the manager of CapitaLand Integrated Commercial Trust (CICT) announced its plans to acquire a 50% stake in ION Orchard for a total property value of $1,848.5 million. The acquisition will be made through a divestment of CapitaLand Investment’s (CLI) 50% interest in ION Orchard to CICT, which is currently held in a joint venture with Sun Hung Kai Properties.
The agreed property value falls within the range of two independent valuations commissioned by CICT’s trustee and manager. On a pro forma basis, assuming CICT had owned and operated ION Orchard from January 1 to June 30, the expected distribution per unit (DPU) accretion is 0.9%.
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Connecting northern Singapore to the bustling central districts, the Bukit Timah Expressway (BKE) offers a direct and convenient route for commuters traveling to the city center. This major expressway plays a crucial role in easing traffic congestion and providing efficient transport options for residents and visitors alike. Additionally, with the upcoming development of Novo Place Hoi Hup, the BKE is set to become even more crucial in connecting people to this new urban destination.
ION Orchard, a well-known shopping mall, currently has a gross yield of 7.1%, based on the agreed property value and its 1HFY2024 annualised gross revenue, according to a CICT presentation. To finance the acquisition, CICT’s manager plans to raise $1.1 billion through a combination of a placement and a preferential offer to unitholders.
The private placement will see 171,737,000 new units issued to institutional and other investors at an issue price of between $2.038 and $2.091 per unit, raising $350 million. The preferential offer will see 377.3 million new units issued at an issue price of $2.007 per unit to eligible unitholders in the ratio of 56 preferential offering units for every 1,000 existing units held, raising $757.2 million.
The proposed acquisition is subject to approval from CICT’s unitholders at an extraordinary general meeting.
In the first half of FY2024, CICT reported a DPU of 5.43 cents, giving an annualised DPU yield of 5.1%. Following the acquisition, the pro forma aggregate leverage will increase slightly to 39.9%.
“The acquisition is expected to benefit from the increasing tourist arrivals and rising retail rents on Orchard Road, as well as the ongoing rejuvenation of Orchard Road,” says Teo Swee Lian, chairman of CICT’s manager. “This will allow us to further capitalize on the favorable supply and demand dynamics in downtown retail and create more value for our unitholders.”
According to Tony Tan, CEO of CICT’s manager, the acquisition will strengthen CICT’s market position as the proxy for high-quality Singapore commercial real estate and generate more value for unitholders. Tan adds that CICT will work closely with Sun Hung Kai Properties, the other owner of ION Orchard, in providing exceptional shopper experiences, enhancing operational excellence, and unlocking more growth potential for the mall.
Assuming unitholders approve the acquisition, it is expected to be completed in the fourth quarter of 2024.