SINGAPORE - CapitaLand Ascott Trust (Clas) is divesting Citadines Mount Sophia Singapore for $148 million in a deal that is estimated to be completed in the first quarter of 2024.

On Feb 2, its managers said the consideration is 19.4 per cent above the 154-unit serviced residence’s book value as at end-2023.

It also represents a divestment of “close to $1 million per key, which is a significant premium to book value”, said the managers’ chief executive Serena Teo.

The transaction is expected to result in net proceeds of about $138.6 million, as well as a net gain of some $14.6 million.

Based on Clas’ financial year 2023 earnings before interest, taxes, depreciation and amortisation, the exit yield for Mount Sophia Citadines Singapore would stand at 3.2 per cent.

Ms Teo said the sale of Citadines Mount Sophia Singapore brings Clas’ divested asset value over the last eight months to $408.1 million across 10 mature assets.

In turn, this is estimated to unlock $38.9 million in gains, at an average exit yield of about 3.8 per cent.

Clas’ managers intend to use capital from the sale of these 10 assets to reduce the group’s debt, fund asset enhancement initiatives, or redeploy it into higher-yielding investments to increase the returns of its portfolio.

These divestments can offer Clas greater financial flexibility and potentially lower its gearing by close to 2 percentage points, said Ms Teo.

Looking ahead, she said Clas seeks to “expand (its) portfolio opportunistically with more yield-accretive assets”.

“Over the past three years, distribution income gained from our investments has more than replaced the distribution income from the properties that were divested,” added Ms Teo.

Stapled securities of Clas closed up 1.04 per cent on Feb 2 at 97 cents. THE BUSINESS TIMES