Hot on the heels of another divestment – Citadines Mount Sophia sold
- CLAS announced the divestment of Citadines Mount Sophia for S$148m, or c.19% above the assets FY22 valuation
- Divestment price translates to c.S$960k per key, comparable to recent transactions for serviced residence products, including Orchard Hills Residences under MGallery sold for S$1,011k per key and Parkroyal Hotel’s price of S$968k / key
- Favourable Exit yield of c.3.2% to be recycled into debt repayment, AEI commitments and acquisitions
- Maintain BUY on CLAS with our current TP of S$1.30
What’s new
- CLAS announced this morning (2 Feb) the divestment of Citadines Mount Sophia Singapore to an unrelated third party.
- Divestment price of S$148m is c.19% above the assets last valuation in FY22 of S$123.7m and above CLAS’ book value of S$107m.
- The asset is a serviced residence within the Dhoby Ghaut precinct, yielding a total of 154 units, ranging from studios to 2-BR apartment units.
- Exit yield of c.3.2%
- Net proceeds from the divestment of c.S$139m to be recycled into debt repayment, or rechannelled to AEI and acquisitions.
- Expected completion date in 1Q24
- The divestments can offer CLAS greater financial flexibility, potentially lowering our gearing by close to 2 percentage points
Our thoughts
Exit price translates to c.960k per unit. The divestment price of S$148m represents a price per key of c.S$960k, which tracks closely to past hotel transactions within the CCR region. The most recent transactions in the market within the CCR region include Park Royal hotel (full service) on Kitchener Road, which was sold for S$968k per key, and service residence Orchard Hill Residences (under branding Accor’s MGallery), which was sold for S$1,011k per key. Exit yield of 3.2% will mean that the income gap from the divested asset can be fully neutralised by corresponding debt repayment, on the notion of CLAS’ average cost of debt. CLAS divested a total of 10 assets since early 2023, for a total quantum of S$408m, with an average exit yield of 3.8%. Paring down of debt from these proceeds will lower gearing by close to 2ppt. We see the divestment proceeds be rechannelled into upcoming AEI commitments (The Temple Bar, Cavendish London, Novotel Sydney Central), a positive move to switch up a mature asset with stabilised yields into (i) AEIs delivering ROI of >10%, (ii) Uplift in RevPAR to enhance asset valuation post AEI and support NAV/share, (iii) while maintaining gearing at the current c.38% for further asset acquisitions.
Investment interest into the hospitality market returns. The onset of the news is accompanied by another few hotel properties on the market that are in advanced negotiations as the softening interest rate environment, accompanied by strong RevPAR performance within the Singapore hotels market has now prompted buyers to take action. Singapore and Singapore Tourism Board has shaped itself well as a top MICE and concert hub venue, with estimates that full recovery in this space will come in 2024 – 2025. A stronger MICE calendar helps solidify forward bookings and room rates as room demand visibility is stronger across MICE event months.
Amongst other hotel assets that is on the market, Capri y Fraser is said to be undergoing due diligence, while Citadines Raffles Place is also in the process of marketing.
The list of hotels that are currently in process of marketing or due diligence include:
- Dorsett Singapore 285 rooms
- Citadines Raffles Place 299 units ~ rumoured price of S$1m per key
- Capri by Fraser Changi 313 room ~ rumoured price of S$170m
Source: DBS Bank Ltd, Company
Comparable transactions in the market
| Date | Property Name | Type | Address | Units | Price ($m) | $/Units (‘000s) | Owner/Buyer | Seller |
| Feb-24 | Citadines Mount Sophia | Serviced Residence | 8 Wilkie Road | 154 | 148 | 960 | – | CapitaLand Ascott REIT |
| Jan-24 | Hotel G | Limited Service Hotel | 308 | 240 | 779 | CapitaLand | Gaw Capital | |
| Jul-23 | Parkroyal on Kitchener Road | Full-service Hotel | 181 Kitchener Rd | 542 | 388.24 | 968 | Worldwide Hotels | UOL Grp Ltd |
| Jun-22 | Orchard Hills Residences | Serviced Residence | 30 Bideford Rd | 168 | 125.21 | 1,011 | Roark Capital Ltd, Boustead Singapore, Lim Cher Meng Realty Pte Ltd | Sin Capital Partners |
| Apr-22 | SO/ Singapore | Full-service Hotel | 35 Robinson Rd | 134 | 176.91 | 1,791 | Viva Land Investment & Development Joint Stock Company | Royal Group |
| Mar-22 | Central Square Village Residences | Serviced Residence | 20 Havelock Rd | 128 | 244.28 | 2,446 | CDL | Far East HTrust |
Source: DBS Bank Ltd, Media