The manager of Starhill Global REIT, on Dec 30, announced that its Japan subsidiary entered into a sale and purchase agreement (SPA) to divest its entire beneficial interests in the Daikanyama property for a cash consideration of JPY1.88 billion ($18.9 million).
The consideration represents a premium of 39.1% to the property’s latest valuation of JPY1.35 billion as at June 30. The price also represents a premium of 2.9% to its acquisition price of JPY1.82 billion.
The Daikanyama property is located in the Ebisu district in the Shibuya-ward in Tokyo. It is a three storey building that has 8,087 sq ft of net lettable area (NLA) for retail and office use. It accounts for 0.5% of the REIT’s asset value and 0.4% of its portfolio net property income (NPI).
After the transaction, the REIT will have one asset left in Tokyo, which is Ebisu Fort. Ebisu Fort has an asset value of JPY3.62 billion ($36.5 million), representing 1.3% of the REIT’s total asset value.
According to the REIT manager, the net proceeds from the sale of the property will be used to repay the yen borrowings, as well as go to capital purposes.
The REIT’s gearing is expected to decrease to 36.1% from 36.5% previously, assuming that the net sale proceeds are substantially used to repay the yen borrowings.
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The pro forma financial effects of the divestment are not expected to be substantial.
“We are pleased to announce the divestment of Daikanyama at an attractive premium to both the latest valuation and our original acquisition price. As the investment was largely funded by yen borrowings, there is minimal currency impact despite recent weakness of the Japanese yen against the Singapore dollar,” says Ho Sing, CEO of the manager.
“Regardless of the Tokyo divestments in the past few years, Japan remains one of our key markets of interest and we will continue to explore potential investment opportunities. This divestment allows us to unlock value, pare down debt and provide us with greater financial flexibility and capacity to focus on new assets that align with our growth strategy,” he adds.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
The sale of the property is expected to be completed in early 2023.
As at 1.12pm, units in Starhill Global are trading 0.5 cent lower or 0.92% down at 54 cents.
