01 Mar

The Ascott Group Divests Retail Podium at Orchard Point for $91 Million

The Ascott Group has entered into an agreement to sell its retail podium at Orchard Point for $91 million.

Orchard Point along Orchard Road comprises the four-storey retail podium, a five-storey carpark, and Somerset Orchard, an 88-unit serviced residence block which the group will retain ownership and management.

The company will obtain a strata subdivision for Orchard Point and a separate strata title for the retail podium by August 2002, which is a condition for the completion of the sale. However, full payment is expected by August this year.

The disposal of the retail block is part of the company’s strategy to divest its non-core assets to focus on its core serviced residence business.

The chief executive officer of The Ascott Group, Mr Kee Teck Koon, said: "Orchard Point is the first in our retail portfolio to be divested. We decided on a strata title sale of Orchard Point’s retail podium in this case, as it is the best way to maximise value for our shareholders.

"The shopping centre represents a rare opportunity for the buyer. A prime medium size retail property with excellent Orchard Road frontage, close to the MRT station, and proven shopper traffic is hard to come by," he added.

Mr Kee said that The Ascott Group is moving rapidly to effect its retail property divestment programme and is optimistic of completing the divestment of $500 to $600 million of its retail assets this year, given the strengthening retail property market.

"We are in various stages of discussions with several parties on the divestment of our other shopping malls in Singapore. We are working on several modes, from portfolio sale to long term lease arrangements, and expect to conclude more transactions over the next few months," he said.

Mr Kee added that two- thirds of the expected proceeds would be used to retire debts. Together with cash generated from operations and proceeds from recently sold non-core properties already sold, such as Springleaf Tower, the funds will lower the group’s current gearing of 0.9 to below 0.6.

One-third of the divestment proceeds will be set aside to fund the group’s serviced residence expansion in Europe, North Asia and Australia, growing its network of serviced residences to 15,000 units by 2005, from its current 6,000 units.

"The divestment will release cash and management’s resources to concentrate on growing our serviced residence business. Our future acquisitions will focus mainly on operational properties which are immediately earnings accretive."

He added that the company targets one-third of its portfolio to comprise managed or leased properties, compared to 18 per cent currently.

"We will leverage on our expertise in managing serviced residences to increase our management fee income base to 25 per cent of our revenue, from our current five per cent. This will enable us to realise value beyond our property assets and enhance return on equity," he said.

As the Orchard Point retail podium has a book value of $83.3 million, the sale will result in a net gain of $5.9 million for the group, contributing to its earnings per share of 0.37 cent and an increase of 0.48 cent in its net tangible assets per share for the current financial year.

Orchard Point shopping centre commands 100 per cent occupancy with a tenant mix spanning entertainment related shops, fashionable boutiques and F&B outlets.

The retail podium with GFA of 16,323 sq metres comprises basements, the first to fourth storeys, and parts of the fifth and sixth storeys of Orchard Point. It has a leasehold tenure of 97 years commencing Sept 23, 1985. The car park block will become common property to be managed by the management corporation to be formed.

The Ascott Group is Asia Pacific’s largest serviced residence company. Created through the merger between The Ascott Limited and Somerset Holdings Limited in November 2000, the group owns and/or manages over 6,000 serviced residence units in 16 cities in 10 countries.

Headquartered in Singapore, The Ascott Group’s shares are listed on the Singapore Exchange as "Ascott". The group is the serviced residence arm of CapitaLand Limited, Southeast Asia's largest listed property company.






Ida Lim, Vice President
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Tay Cheng Cheng, Assistant Manager
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