CapitaLand Integrated Commercial Trust (CICT)

[weijian]

WeWork to lease 21-storey Singapore office tower after HSBC moves out

Aradhana Aravindan
JULY 17, 2019 / 8:24 AM

SINGAPORE (Reuters) - WeWork Cos will lease a 21-storey building in Singapore’s prime financial district that is currently leased to HSBC, marking an expansion by the U.S. co-working space provider in Asia.

WeWork, backed by Japan’s SoftBank Group (9984.T), will lease the building from CapitaLand Commercial Trust (CCT) (CACT.SI), the Singaporean office landlord said in a statement.

The tower, 21 Collyer Quay, will be WeWork’s biggest property in the Southeast Asian nation and has a net lettable area of about 200,000 square feet.

CCT said its lease deal with Hongkong and Shanghai Banking Corp Ltd, a unit of HSBC Holdings Plc (HSBA.L), will end in April 2020 but did not give financial details of the new lease.

Co-working spaces have become popular among startups because these give them the flexibility of short-term leases in well-decorated spaces and keep overheads low. Increasingly, larger companies are also using co-working firms to manage their offices.

In Singapore, the flexible workspace footprint has more than tripled since 2015 and now accounts for some 4% of the office space in the central business district, according to real estate consultancy Colliers.

WeWork may get signage rights for the building, which would boost its branding and visibility in the central business district, said Christine Li, head of Singapore and Southeast Asia research at property services firm Cushman and Wakefield.

“It’s a very good catch for WeWork,” said Li, because typically only a few floors are available in the business district due to low vacancy.

The lease will start in the second quarter of 2020 for seven years, CCT said. WeWork will occupy 20 floors of the building, the U.S. firm said in a separate statement, but did not provide details about the one other floor.

HSBC Singapore said last year that it would relocate its head office to Marina Bay Financial Centre, within the central business district.

Rents for grade A buildings in Singapore’s central business district surged 12.7% last year, Cushman and Wakefield’s Li said.

More details in https://www.reuters.com/article/us-capit...SKCN1UC03A

From CICT's 3Q23 update, WeWork Spore is CICT's 2nd largest tenant in terms of gross rental (~2.4%). While US parent is not competitive, but is there a case for someone to take over WeWork Spore when parent finally declares bankrupted?

WeWork insists it’s business as usual in Singapore amid talk of US parent seeking bankruptcy protection

All its 14 locations here still operational, but landlords monitoring situation closely

https://www.businesstimes.com.sg/propert...bankruptcy

[CY09]

Dont think whichever company that takes over wework Singapore subsidary will maintain the 14 locations. I have been to wework/spaces/justco and what I can say is that the takeup area for their avaliable spaces has worsened since the days of 2022 when i went to meet a vendor who uses hot desking space to meet the extra projects dished out to them.

With so much vacancies, I do not think business is profitable as well. Am expecting if Wework singapore survives, it will only continue leasing a much fewer number of locations.

[EnSabahNur]

An update to the Gallileo property in Frankfurt, where Commerzbank is giving up the lease, but the English Theatre Frankfurt's status was uncertain.

This looks like a happy ending for everyone.

Also unconfirmed, it sounds like the ECB may be taking up the lease that Commerzbank is giving up.

https://adragonhoard.blogspot.com/2024/0...perty.html

[weijian]

15years after it first opened, Ion Orchard is finally in the hands of a Capitaland REIT. Beyond the usual stuff (financial engineering, rights issue etc), 2 things that are slightly different stands out:

(1) CICT will acquire the 50% stake in the property manager, since the way the JV is structured and uses an internal property manager). IIRC, it is quite similar to NTUC property arm (Mercatus Co-operative)'s sale to Link REIT in 2023.

(2) Further upside from tax exemption has not been accounted for in the accretive earnings calculation.

PROPOSED ACQUISITION OF 50.0% INTEREST IN ION ORCHARD AND ION ORCHARD LINK

Through the Proposed Acquisition, CICT will indirectly hold 50.0% of OTH and IOL which amounts to a 50.0% stake in the Property and a 50.0% stake in OTD, the property management function of the Property.

The pro forma DPU accretion may potentially be higher due to the possibility of tax savings should there be a conversion of the Property holding entities to allow for tax transparency, along with the possibility of a total payout from the Property. The potential conversion of the Property holding entities for tax transparency purposes is subject to the JV Partner’s agreement, and the approval of the relevant authorities.

https://links.sgx.com/FileOpen/CICT_Acqu...eID=817751

[weijian]

CICT will be holding its EGM next week to approve the RPT of 50% of Ion Orchard from its Sponsor.

Question3 below is key as it basically indicates that with the acquisition as it is, DPU (enlarged basis) is -1.5%, a good indication of the weighted cost of capital in the current environment. Putting the tax benefit aside, the REIT manager has the discretion to adjust "mgt fees paid in units"% to get the desired DPU accretion.

Extraordinary General Meeting to be held on Tuesday, 29 October 2024 Responses to Substantial and Relevant Questions

From the table provided in the circular/slides, it appears that tax transparency would have a major impact on whether the deal is ultimately DPU accretive, or otherwise and the quantum of DPU accretion.

Can you advise and elaborate on the requisite steps and necessary conditions to secure tax transparency? How confident is CICT that it will be able to secure tax transparency? Please advise and elaborate.

Would you please also explain how the quantum of Enlarged CICT Management Fees in Units (MFU) will be determined? Would it be 50%, 52%, 60%, 70%? Please advise.

https://links.sgx.com/FileOpen/20241024_...eID=822840

[weijian]

From CICT's 9M24 update, its weighted cost of debt is ~3.6% (it was ~3.3% 1 year ago). Some of its MTN issued in the last 2 years were on the wrong side of 3.XX% and so there is a high chance weighted cost of debt has not peaked yet.

Current asset is been divested at BV and with all things been equal (regardless of frictional costs etc), the exit yield is below 3.5%. Therefore if the proceeds are used to pay down debt, that would be slightly accretive towards its "distributable income". Looks like a good move I suppose.

DIVESTMENT OF 21 COLLYER QUAY

After taking into account the Divestment related expenses (including the divestment fee of approximately S$3.4 million1 payable to the Manager) and certain completion adjustments, the net proceeds from the Divestment would be approximately S$681.7 million. This will provide CICT with greater financial flexibility to repay debt, to finance any capital expenditure, asset enhancement works and investments and/or to finance general corporate and working capital requirements. Based on the annualised net property income for the period ended 30 September 2024 and the Consideration, the exit yield is below 3.5%.

https://links.sgx.com/FileOpen/20241112_...eID=824808

[weijian]

Another "non core" divestment by CICT. The exit yield is lower than CICT's current dividend yield and so it will be accretive to shareholders. I had assumed the ideal buyer would be her sister CL Ascott Trust (CLAS) but since CLAS is trading at much higher yields, there isn't a chance. The would-be buyer would have to be folks with deep pockets and looking for wealth preservation/capital gains over consistent payouts.

In general, Mgt contracts are signed for ~10+10years. Since Citadines Raffles Place only started operations in 2022, I would assume that the mgt contract with Ascott Ltd remains as well. There is probably also less reason/s to change your operating partner due to the connections that the CL commercial property manager has with the corporates.

CICT and JV partners divest Citadines Raffles Place at CapitaSpring for $280 mil

CapitaLand Integrated Commercial Trust (CICT) and its joint venture partners — CapitaLand Development and Mitsubishi Estate Asia with respective stakes of 45%, 45%, and 10% — have divested the serviced residence component of CapitaSpring for $280 million. The asset divested is the 299-unit Citadines Raffles Place Singapore, which began operations in February 2022.

Based on CICT’s 45% stake, its estimated proceeds from the sale are about $37.8 million, with an exit yield of approximately 3.6%. The divestment is expected to be completed by 2Q2025.

While CICT declined to disclose the buyers, it was previously reported in October 2024 that the joint purchasers were US investment giant BlackRock and the hospitality arm of Malaysian developer YTL Corp.

https://www.edgeprop.sg/property-news/ci...ng-280-mil