CapitaLand (CAPL) has proposed to divest its interests in four serviced residences and three rental housing properties in Australia and Japan to Ascott Residence Trust (ART) for a total consideration of S$246.0m. These assets comprise the 380-unit Citadines on Bourke Melbourne, the 160-unit Citadines Shinjuku Tokyo, the 124-unit Citadines Karasuma-Gojo Kyoto and four rental properties in Osaka Japan. We understand that CAPL is expected to book a net divestment gain of S$27.7m from the sale.

In addition, the sale is conditional on ART obtaining approval of its unitholders at an EGM and is expected to be completed by end Jul 2015. We like that the group continues to actively recycle capital and the divestment of these mature assets will strengthen its balance sheet and allow proceeds to be reinvested in future projects. Maintain BUY with an unchanged fair value estimate of S$4.07.

Source: OCBC Research - 25 Jun 2015