The sale price represents a 23.2% premium over the valuation of $143.7 million as at 15 October 2011, and a 3.9% annualised yield on Chijmes’ net property income of $5.2 million for the nine months ended 30 September 2011. The divestment price is also 38.3% above its purchase price of $128 million in Dec 2005.

A premier dining and entertaining establishment located in the heart of downtown Singapore, Chijmes is the award-winning gazetted national monument which is also recognised by Unesco as an Asia Pacific Culture Heritage Conservation Building, which means its GFA (Gross Floor Area) is fixed. As at Sept 30, there are 31 tenants. Major tenants by gross rental include Lei Garden Restaurant, Watabe Singapore and Maracana Group.

 

Chijmes contributes 3.7% to the trust’s NPI (Net Property Income) and with its NLA of 79,794 sq ft accounts for 2.3% of Suntec REIT’s portfolio. According to Suntec REIT’s announcement, the divestment would impact proforma NAV (Net Asset Value) as at Dec 31 2010, lifting it to $1.80 from $1.783. DPU would fall from 9.859 cents to 9.686 cents.

 

The rationale for the divestment is to provide Suntec REIT with greater financial flexibility for fund deployment, value enhancement and/or to repay debt. Yeo See Kiat, CEO of Suntec REIT’s manager, says in a statement, “The divestment is in line with Suntec REIT’s proactive approach in reviewing and evaluating asset plans for its portfolio.”

 

Separately, ARA Asset Management, the manager of Suntec REIT, would also benefit from the divestment through fee income.

 

On Oct 26, Suntec REIT reported 3QFY11 DPU of 2.533 cents, up 1.2% y-o-y and flat q-o-q, notes OCBC in a recent report. Together with 1H11 DPU of 4.92 cents, DPU totalled 7.453 cents for the first nine months of the year. “This is above both our and consensus forecasts,” OCBC says. “However, office portfolio occupancy was weaker at 98.6%, dragged down mainly by weakness at Suntec City office.”