ESR-REIT lays out long-term strategy to reconstitute portfolio

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ESR-REIT has issued a clarification of its long-term plans, partly in response to the REITsWeek article that was published on 25 August.

In the article, REITsWeek reported that ESR-REIT has mounted yet another attempt to divest its property in the Gul industrial district.

Related: ESR-REIT makes another attempt to dispose Gul industrial district properties

“Since 2017, the manager continues to execute its strategy of divesting non-core assets while acquiring and rejuvenating future-ready assets to improve portfolio returns”, said an ESR-REIT spokesperson on 27 August.

“5 & 7 Gul Street 1 has a GFA of about 98,863 square feet. Given its relatively small size and short remaining land lease, the manager has identified the property as a non-core asset and has listed it for sale since 2019”, it added.

ESR-REIT has also clarified that the property’s latest valuation as at 30 June 2020 is SGD13.9 million (USD10.1 million).

It was acquired by the REIT, which was then known as Cambridge Industrial Trust, in 2011 for SGD14.5 million excluding transaction costs.

ESR-REIT is seeking to divest it for SGD15 million.

The property is currently multi-tenanted, instead of master-leased.

“As at 30 June 2020, 44.6% of our portfolio constitutes business parks and high-specs industrial”, said the REIT, providing a list of its recent divestments and acquisitions.

The divestments has thus far been executed at above valuations.

Completion Date Property Sale Consideration
29 Aug 2017 55 Ubi Avenue 3
(General Industrial)
SGD22.1m (0.6% above valuation of SGD22.0m and 17.7% above acquisition price of SGD18.8m in 2007)
16 Nov 2017 87 Defu Lane 10
(General Industrial)
SGD17.5m (0.6% above valuation of SGD17.4m and 34.0% above acquisition price of SGD13.06m in 2006)
7 Dec 2017 23 Woodlands Terrace
(General Industrial)
SGD17.7m (2.8% above valuation of SGD17.2m and 14.8% above acquisition price of SGD15.4m in 2007)
5 Mar 2018 9 Bukit Batok Street 22
(Logistics & Warehouse, cargo lift)
SGD23.9m (1.3% above valuation of SGD23.6m and 30.6% above acquisition price of SGD18.3m in 2007)
28 June 2019 31 Kian Teck Way
(General Industrial)
SGD5.8m (1.7% above valuation of SGD5.7m and 81.2% above acquisition price of SGD3.2m in 2006)

These divestments are lower-yielding assets, and each asset is worth less than SGD25 million, said the REIT.

Meanwhile, its recent acquisitions are higher-yielding assets that increases ESR-REIT's exposure to high-specs and ramp-up logistics facilities, it said.

Completion Date Property Purchase Consideration
14 Dec 2017 8 Tuas South Lane
(General Industrial)
SGD95.0m
14 Dec 2017 7000 Ang Mo Kio Ave 5
(High-Specs Industrial)
SGD240.0m (ESR-REIT holds a 80% interest)
25 October 2018 15 Greenwich Drive
(Ramp-up Logistics & Warehouse)
SGD95.8m (includes consideration of SGD86.2m and upfront land premium of SGD9.6m payable on balance lease term)
7 August 2019 48 Pandan Road
(Ramp-up Logistics & Warehouse)
SGD225.0m (ESR-REIT holds 49% interest)

Besides high-tech industrial assets, ESR-REIT also harbours ambitions to enter the date centre segment, as reported by REITsWeek in July 2020.

Related: ESR-REIT’s data centre ambitions in limbo for now due to environmental red tape

ESR-REIT was last done on the Singapore Exchange at SGD0.39.

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