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CapitaLand’s sale of Innov Tower is expected to generate net profits of about S$85 million, which could be used to partly fund the acquisition of Guozheng Center, reported the Singapore Business Review, citing a report from DBS Group Research.
“This is the hallmark of CapitaLand’s portfolio reconstitution strategy, realising value from more mature assets (Innov Tower) and redeploying proceeds to properties with further upside potential (Guozheng Center),” said the brokerage firm.
When Guozheng Center is fully leased, the company is expected to record further capital gains when prices of office buildings stabilise in the medium term, enabling CapitaLand to improve its returns.
Moreover, the company is anticipated to invest more in key cities of Singapore and China, a move that would bolster its stock price, added DBS Group Research.
On Thursday (1 June), CapitaLand announced that it is buying the Guozheng Center and selling the Innov Tower for a combined value of 4.2 billion yuan (S$854.92 million).
Its wholly-owned subsidiary CapitaLand China has agreed to purchase the Guozheng Center, a newly completed office project in Shanghai’s Yangpu District, from unrelated parties for 2.64 billion yuan (S$535 million). This works out to 32,713 yuan (S$6,628) psm based on the development’s gross floor area (GFA) of 80,701 sqm.
CapitaLand has also agreed to sell the Innov Tower, an eight-year-old office building in Shanghai’s Xuhui District, to an unrelated party for 1.56 billion yuan (S$316 million), or 38,500 yuan (S$7,800) psm based on the property’s GFA of 40,445 sqm.
Both transactions are expected to be completed by June 2017.
This article was edited by Denise Djong.
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