Analyst Note| Xavier Lee |
CapitaLand Integrated Commercial Trust, or CICT, is divesting One George Street for SGD 1,281.5 million, of which its 50% stake equates to SGD 640.7 million and net proceeds, after repaying debt and related fees, will be SGD 344.8 million. The sale is expected to be completed in December 2021 and the selling price represents a 14.2% premium from its fiscal 2020 year-end valuation of SGD 1,122 million. Management expects the proceeds to provide greater financial flexibility to repay debt and fund growth opportunities. We have assumed that the proceeds will be used for debt repayment in the near term and subsequently redeployed into higher yielding opportunities in future years. We do not expect a huge change in distribution per unit as the decrease in distribution from joint ventures would be offset by savings on its interest expense and income from the subsequent redeployment of the proceeds. We updated our model accordingly and retain our fair value estimate of SGD 2.66 per unit. The transaction does not alter our narrow economic moat rating and stable moat trend on the trust.