<Alert> CapitaLand Integrated Commercial Trust (CICT): News Analysis: Exchanging JCube for Singapore office?
- CICT announced the divestment of JCube back to CapitaLand Group for S$340m (S$1,619psf) at implied exit yield of less than 4%, a fair price based on its current built-up state, in our view.
- Could this be an exchange for 79 Robinson Road subsequently? CICT has been stepping up its asset recycling efforts in the past few months, crystallizing and optimising its portfolio.
- The sale of JCube back to CapitaLand Group begs the question if the site could be primed for redevelopment potential.
- Maintain BUY on CICT, TP of S$2.50; CICT remains to be a reopening play with recovery in both retail and office.
CICT announced the divestment of JCube last night to CapitaLand Group Pte Ltd for S$340m. CICT has stepped up its asset recycling efforts in the past few months.
Key divestment details:
Divestment consideration: S$340m / S$1,619psf
Land tenure: 99-year leasehold from 1 Mar 1991, 68 years remaining
NLA: 210,038sqft
Divestment NPI yield: less than 4%
Occupancy as at 31 Dec 2021: 95.5%
Net proceeds: S$334.7m
Net gain: S$56.7m
Our Views
A clean exit for CICT. The sale price of S$340m (or S$1,619 psf), translating to a c.21%-22% premium to valuation with an estimated exit yield of <4% is a fair exit price for CICT based on its current built-up state, in our view. Performance of JCube has over the years tough over the years given that the mall’s location opposite to Westgate (owned by CICT) and JEM (partially owned by LREIT) where most of the traffic have gravitated to, given their proximity to the MRT station and bus interchange. While the ice-skating rink at JCube maybe a draw to aspiring skaters, the lower foot traffic has resulted in a higher tenant churn over the years.
JCube in exchange for 79 Robinson Road? CICT has been stepping up its asset recycling efforts in the past few months, realising value of 2 properties (One George St, JCube) and acquiring 3 assets in Australia. The net proceeds of c.S$335m could potentially be redeployed into other assets such as potential pipeline acquisition such as 79 Robinson road.
CapitaLand gains redevelopment opportunity? The sale of JCube back to CapitaLand begs the question if the site could be primed for redevelopment. JCube currently sits on a land with 3.0x plot ratio while the surrounding plot ratios range between 4.2x to 5.6x. We believe the best use for JCube is if the site could be rezoned into residential/ commercial mixed use. Similar to the redevelopment of Bedok Point, Capitaland Development (“CLD”) could potentially gain from higher plot ratio and rezoning, if successful. At a land rate of S$1,619psf, assuming that the site gets approval for a rezoning into to a mixed-use site with higher plot ratio, the all in land rate could be ranging from S$1,100 – S$1,200 psf, which is an attractive level for CLD to drive returns.