11 Serangoon North Avenue 5. (Photo: RENDY ARYANTO/VVS.sg)

ESR-REIT is divesting 11 Serangoon North Avenue 5 and 3C Toh Guan Road East for approximately SGD53.0 million, excluding divestment costs.

The sale consideration represents a 5.0% premium to the total fair value of the properties as at 31 December 2020, and a 7.1% premium to their total acquisition price.

The divestment proceeds may be deployed towards repaying loans, funding asset acquisitions and enhancements, unit buy-backs, or working capital requirements, said the REIT on 28 April.

If the net proceeds from the divestment are fully utilised to repay outstanding borrowings, the pro forma gearing of ESR-REIT would be reduced to 40.9% from 42.0% as at 31 March 2021.

The divestment is not expected to have a material impact on ESR-REIT’s net asset value and net property income for the financial year ending 31 December 2021, the REIT added.

“This divestment is in line with our ongoing portfolio optimisation strategy to monetise non-core assets which can be channelled towards value creation opportunities”, said Adrian Chui, CEO of ESR-REIT’s manager.

Following the divestment, ESR-REIT’s diversified portfolio will consist of 55 properties located across Singapore with a total gross floor area of approximately 14.8 million square feet.

The divestment is expected to be completed in 2H2021 or as soon as JTC Corporation grants the necessary approval for the proposed sale.

ESR-REIT was last done on the Singapore Exchange at SGD0.415, which implies a distribution yield of 7.71% according to data compiled on the Singapore REITs table.

By Shariffa Al-Habshee

Shariffa joined REITsWeek in 2017, and monitors Asia-Pacific REITs for the publication.