By Reico Wong
South-east Asia's largest property developer, CapitaLand, yesterday said that it will acquire a prime-location serviced residence in Singapore from its subsidiary, Ascott Residence Trust, for $359 million, and redevelop it into an integrated development, to increase profits.
CapitaLand added that it will pour an additional $900 million to $1 billion into the redevelopment of the building, Somerset Grand Cairnhill.
Located just off Orchard Road, the redeveloped property will comprise a 20-storey serviced residence with a hotel licence, and a high-end 30-storey residential development. It has a combined allowable gross floor area of 466,429 sq ft.
The serviced-residence portion will take up some 186,571 sq ft of space, or about 40 per cent of the development, and will see 371 units being rolled out.
It is slated for completion in the third quarter of 2017, and is expected to be sold back to Ascott Residence Trust for $405 million.
The trust is not allowed to undertake the redevelopment itself, due to restrictions laid out by the Monetary Authority of Singapore in its Code on Collective Investment Schemes.
Its divestment of Somerset Grand Cairnhill, however, is expected to bring in $87.1 million, in terms of gross divestment gain.
Residential apartments in the redeveloped property, meanwhile, will number between 200 to 250 units. These will be sold by developer CapitaLand, who said it is targeting high-net- worth young professionals and families as main buyers.
Mr Wong Heang Fine, chief executive of CapitaLand Residential, said: "As an integrated development with a serviced-residence component, there will certainly be opportunities to explore and create synergies between the two to bring value to homebuyers, in the form of new amenities and services."
At the same time, CapitaLand also said yesterday that it will sell two of its properties, Ascott Raffles Place and Ascott Guangzhou, to Ascott Residence Trust for $283.3 million.
The 146-unit Ascott Raffles Place will be sold for $220 million. Ascott Guangzhou, located within China's Tianhe financial district, comprises 208 serviced-residence units and will be let go at $63.3 million.
These divesments will result in a net gain of about $51.4 million for Capitaland, and is expected to push up its total net profit this year to $98.9 million.
Some $42.7 million of this will come from the share of Ascott Residence Trust's profit from its sale of Somerset Grand Cairnhill.
Proceeds from the sale of the two properties will be used to fund CapitaLand's acquisition of the Cairnhill development and new investment opportunities in the Asia-Pacific region and Europe.
The deals are still subjected to the approval of Ascott Residence Trust's unitholders.
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