Allgreen Properties has been something of a contrarian when it comes to Singapore property. Unlike City Developments (CDL), S-REITs such as Mapletree Pan Asia Commercial Trust N2IU (MPACT), Frasers Property TQ5 (FPL) and Frasers Logistics and Commercial Trust (FLCT) which have sold or are selling their prized Singapore assets, Allgreen is acquiring.
Earlier this year, the developer, which was privatised by controlling shareholder Robert Kuok back in 2011, acquired Seletar Mall from Cuscaden Peak Investments and United Engineers for $550 million.
The Edge Malaysia reported that Allgreen Properties bought back the stake in Johor Bahru City Square (JBCS) mall that it sold to GIC Real Estate for RM850 million ($243 million). JBCS is likely to be located 500m away from a new Johor Bahru-Singapore Rapid Transit System (RTS) station. The RTS should be operational by January 2027, the report says.
Farfetched REIT idea
Along with JBCS and Seletar Mall, Allgreen also owns and operates Tanglin Mall and Great World City. Could all these malls fit neatly into an S-REIT? Analysts The Edge Singapore spoke to didn’t seem excited about the prospect because it was too far-fetched.
On the other hand, CDL announced that it plans to divest some $1 billion of assets to reduce its growing debt pile. So far though, it has continued to acquire assets. Among the acquisitions is Hilton Paris Opéra Hotel. Last month, CDL announced it acquired the 16% stake in Delfi Orchard that it did not own.
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On the whole, CDL has been divesting assets in Singapore though. EdgeProp reported that CDL rolled out for sale a portfolio of 27 strata-titled commercial units at Fortune Centre and another 20 strata-titled commercial units at Sunshine Plaza. EdgeProp also reported that CDL is divesting the 53 warehouse units at Citilink Warehouse Complex and 44 factory units at Cititech Industrial Building. Of course, CDL continues to landbank and acquired a site near Zion Road in a government land sale.
Compensated by stability in Singapore
Singapore assets are the ones that have provided stability to developers and REITs. Both CapitaLand Integrated Commercial Trust C38U (CICT) and MPACT, among the two largest S-REITs, announced relatively stable valuations for their portfolios due to Singapore properties which helped to offset lower valuations for their overseas assets.
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Singapore has been particularly important for MPACT following the merger of Mapletree Commercial Trust and Mapletree North Asia Commercial Trust. From a 100% focus on Singapore, MPACT’s AUM proportion and NPI contributions have fallen to 56% and 60% as at March 31.
On May 30, MPACT’s manager announced the divestment of Mapletree Anson. The sale price is $10 million more than the March 31 valuation and $95 million more than the purchase price.
On a pro forma basis, divesting Mapletree Anson lowers aggregate leverage, raises interest coverage ratio and expands debt headroom. On the flip side though, after the divestment, the pro forma portion of AUM (assets under management) from Singapore assets falls to 53% while the net property income (NPI) contribution from Singapore is down to 58%.
Whether the move by MPACT pressures CICT to lower its aggregate leverage remains to be seen. Unfortunately, CICT may decide to divest a Singapore property rather than its German or Australian office buildings which may have underperformed although in 1Q2024, CICT’s business updates indicated that its Australian office properties recorded higher occupancies.
In Germany too, after writing down the valuation of Gallileo to $388.8 million as at end-December 2023 from a purchase price of $569.6 million in 2018, CICT’s manager clinched the European Central Bank as an anchor tenant for 93% of the building.
Separately, FLCT divested Cross Street Exchange in 2022 for $810.8 million, which was the main reason for its low aggregate leverage. In March, FLCT acquired four German warehouses for EUR129.5 million ($190.2 million) from sponsor FPL.
Interestingly, on May 14, FPL announced the divestment of Frasers Residence River Promenade to Tuan Sing for $140.9 million but has retained its underperforming UK business parks.
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In March, CapitaLand Ascott Trust HMN announced the divestment of Citadines Mount Sophia as well as Hotel WBF Kitasemba East, Hotel WBF Kitasemba West and Hotel WBF Honmachi in Osaka. Courtyard by Marriott Sydney-North Ryde in Australia was also divested in January.
While companies have also divested overseas assets from time to time, it increasingly appears that they are selling their best-performing assets to either lower leverage or to recycle proceeds to maintain or acquire poorer-performing overseas assets.
