Ascott Reit Joins CapitaLand-CDL Mission to Redevelop Liang Court Site With Partial Sale of Its GFA
Ascott Residence Trust has decided to join CapitaLand Limited and City Developments Limited’s mission to transform the Liang Court site into a brand-new integrated development, Canninghill Piers. That being said, Ascott Reit has decided to use S$163.3 million to divest 15,170 sq m of the proposed gross floor area of the Liang Court site for Somerset Liang Court Singapore. With some help from the net proceeds from this divestment, Ascott Reit will have the opportunity to transform the retained GFA of 13,034 sq m into a Somerset serviced residence that will also have a hotel license. The lease tenure of the land will be changed from 57 to 99 years. Upon completion of the project, the expected development expenditure of the project stands at about S$300 million.
It is also important to note that Ascott Reit will most likely recognize a fair value gain and total divestment gain of S$84.3 million. The divestment price of S$163.3 million is 138% bigger than the acquisition price and 44% above the book value. It should be noted that the net divestment gain stands at S$41.5 million and that the people behind Ascott Residence Trust are expected to realize a S$42.8 million fair value gain from their retained gross floor area gain in the land. Their EBITDA yield will most likely be about 4% after the performance of the new Somerset residence becomes more stable.
Canninghill Piers Serviced Residence
The Somerset serviced residence is expected to open its door in the second half of 2024, and it should be noted that it will consist of 192 units. With a GFA of 100,263 sq m, the Somerset serviced residence will consist of two residential towers, a hotel, and a commercial component. Upon the completion of the project, Ascott Reit will end up owning the Somerset serviced residence, while CapitaLand and CDL’s joint venture entities will end up owning both the residential component and the commercial component of the project. Also, CDLHT will end up owning the hotel. Starting in 2024, the proposed integrated development project is expected to open its door in several different phases. The consortium is also planning on recreating the river promenade that is surrounding the integrated development. This move is expected to result in new social activities around the integrated development, and it should also improve pedestrian accessibility and increase footfall alongside the Singapore River.
Somerset Liang Court Singapore is currently equipped with 197 apartment units. The new Somerset serviced residence will consist of 192 units, which will have more efficient room sizes and layout. Catering to business executives and ex-pats, more than half of the units that are available here are either one-bedroom or two-bedroom units. Since it will have a hotel license, the Somerset property will also be able to cater to travelers who are not planning on staying there for too long.
Surrounding Connectivity
Since it is located on the fringe of the Central Business District and in the Heart of Clarke Quay, the proposed integral development is directly connected to the Central Expressway. The area features great accessibility since it sits really close to the Clarke Quay MRT station and is directly connected to the Fort Canning MRT station. There is an overhead pedestrian bridge in the area that serves as a direct connection between the integrated development and Fort Canning Park.
With the combination of Ascendas Hospitality Trust and Ascott Reit, the company enjoys a larger balance sheet that provides it with a greater capacity to build its pipeline of creative yield-accretive assets, redevelop the property, and get a potential development gain. This will be the company’s second development project.
The chairman of ARTML has stated that Somerset Liang Court Singapore has enjoyed a healthy average occupancy rate of about 90%, as well as that this is a great time to recycle the company’s capital into transforming its aging property into a new Somerset serviced residence and change the land’s lease to 99 years.
Projects of Ascott Reit
There is one more project that this company is working on, and it is the 324-unit lyf one-north Singapore project. The project sits on Nepal Hill amidst 50,000 professionals, 800 startups, and 400 companies. It will cater to many different professionals, millennials, and entrepreneurs in a very vibrant place that is home to some prominent knowledge and research-based organizations, as well as some good startups and business schools. This property is expected to open its door in 2021, and the construction of both of Ascott Reit’s projects is within the 10% development limit under the Property Funds Appendix.
The transformation of the Somerset serviced residence is mostly funded by net divestment proceeds, which means that the impact on Scott Reit’s gearing is minimal. On September 30, 2019, Ascott Reit’s gearing stood at 33% and the debt headroom was about S$1.1 billion to reach the maximum limit of 45% that had been set by the Monetary Authority of Singapore.
Following Ascendas Hospitality Trust’s combination with Ascott Reit, the new combined entity is expected to end up owning Park Hotel Clarke Quay that is located in the Singapore River precinct. Apart from lyf one-north Singapore and Somerset Liang Court Singapore, Ascott Residence Trust is also the owner of Citadines Mount Sophia Singapore and Ascott Orchard Singapore.
Read more on each Canninghill Piers developer here.
Summary on the Development of Canninghill Piers
- The Liang Court Site consists of Somerset Liang Court Singapore, Novotel Liang Court Singapore, and the Liang Court mall.
- The transformation of the Liang Court site will follow the proposed sale of CDLHT’s total interest in Novotel Singapore Clarke Quay.
- The land lease will be changed from 57 years to 99 years.
- The project is based on the land value of S$140.3 million and the estimated total redevelopment cost of $S157.3 million.
- The project is based on the book value of Somerset Liang Court Singapore, which stood at $S211 million back on September 30, 2019.
- The project is based on the original purchase price of Somerset Liang Court Singapore, which stood at S$127.5 million back in March 2006.
- EBITDA yield is based on project development expenditure that stands at about S$300 million.
- The number of units may not be final.
